4. If the business wanted to pay the least amount of income taxes possible, which method would it choose?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Answer number 4 

For all problems, assume the perpetual inventory system is used unless stated otherwise.
P6-28A Accounting for inventory using the perpetual inventory system-
FIFO, LIFO, and weighted-average
Fit Gym began January with merchandise inventory of 78 crates of vitamins that cost
a total of $4,290. During the month, Fit Gym purchased and sold merchandise on
Merchandise Inventory 363
Learning Objectives 2, 3
2. Ending Merch. Inv., $990
account as follows:
Jan. 5 Purchase
156 crates @ $ 64 each
13 Sale
180 crates @$ 100 each
18 Purchase
114 crates @ $ 75 each
26 Sale
150 crates @ $ 116 each
Requirements
1 Prepare a perpetual inventory record, using the FIFO inventory costing method,
and determine the company's cost of goods sold, ending merchandise inventory,
and gross profit.
2. Prepare a perpetual inventory record, using the LIFO inventory costing method,
and determine the company's cost of goods sold, ending merchandise inventory,
and gross profit.
3. Prepare a perpetual inventory record, using the weighted-average inventory cost-
ing method, and determine the company's cost of goods sold, ending merchandise
inventory, and gross profit. (Round weighted-average cost per unit to the nearest
cent and all other amounts to the nearest dollar.)
4. If the business wanted to pay the least amount of income taxes possible, which
method would it choose?
Transcribed Image Text:For all problems, assume the perpetual inventory system is used unless stated otherwise. P6-28A Accounting for inventory using the perpetual inventory system- FIFO, LIFO, and weighted-average Fit Gym began January with merchandise inventory of 78 crates of vitamins that cost a total of $4,290. During the month, Fit Gym purchased and sold merchandise on Merchandise Inventory 363 Learning Objectives 2, 3 2. Ending Merch. Inv., $990 account as follows: Jan. 5 Purchase 156 crates @ $ 64 each 13 Sale 180 crates @$ 100 each 18 Purchase 114 crates @ $ 75 each 26 Sale 150 crates @ $ 116 each Requirements 1 Prepare a perpetual inventory record, using the FIFO inventory costing method, and determine the company's cost of goods sold, ending merchandise inventory, and gross profit. 2. Prepare a perpetual inventory record, using the LIFO inventory costing method, and determine the company's cost of goods sold, ending merchandise inventory, and gross profit. 3. Prepare a perpetual inventory record, using the weighted-average inventory cost- ing method, and determine the company's cost of goods sold, ending merchandise inventory, and gross profit. (Round weighted-average cost per unit to the nearest cent and all other amounts to the nearest dollar.) 4. If the business wanted to pay the least amount of income taxes possible, which method would it choose?
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