The purchase schedule for Lumbermans and Associates is as follows:DateItems PurchasedCost per ItemMarch 156,000$1.30July 309,000 1.50December 177,000 1.60Total22,000 The inventory balance as of the beginning of the year was $15,000 (15,000 units at $1), and an inventory count at year-end indicated that 11,000 items were on hand. Sales and operating expenses (excluding cost of goods sold) totaled $55,000 and $15,000, respectively. The federal income tax is 30 percent of taxable income.INSTRUCTIONS:Prepare three income statements, one under each of the assumptions: FIFO, average, and LIFO.How many tax dollars would be saved by using LIFO instead of FIFO?Assume that the market value of an inventory item dropped to $1.35 as of year-end. Apply the lower-of-cost-or market (net realizable value) rule, and provide the appropriate journal entry (if necessary) under the FIFO, average, and LIFO assumptions.Repeat (a) above assuming that the costs per item were as follows:Beginning inventory$1.60March 151.40July 301.30December 171.20Which of the three assumptions gives rise to the highest net income and ending inventory amounts now? Why?

Since you have multiples parts . I solved first three parts for you purchase schedule for…

Answered: Assume that the market value of an…

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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The purchase schedule for Lumbermans and Associates is as follows:

Date	Items Purchased	Cost per Item
March 15	6,000	$1.30
July 30	9,000	1.50
December 17	7,000	1.60
Total	22,000

The inventory balance as of the beginning of the year was $15,000 (15,000 units at $1), and an inventory count at year-end indicated that 11,000 items were on hand. Sales and operating expenses (excluding cost of goods sold) totaled $55,000 and $15,000, respectively. The federal income tax is 30 percent of taxable income.

INSTRUCTIONS:

Prepare three income statements, one under each of the assumptions: FIFO, average, and LIFO.
How many tax dollars would be saved by using LIFO instead of FIFO?
Assume that the market value of an inventory item dropped to $1.35 as of year-end. Apply the lower-of-cost-or market (net realizable value) rule, and provide the appropriate journal entry (if necessary) under the FIFO, average, and LIFO assumptions.
Repeat (a) above assuming that the costs per item were as follows:

Beginning inventory	$1.60
March 15	1.40
July 30	1.30
December 17	1.20

Which of the three assumptions gives rise to the highest net income and ending inventory amounts now? Why?

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