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"Cowboy Jeans" Line # of Units Cost per Unit Value Beginning Inventory Balance 3,500 $13.10 $ 45,850 Purchases # of Units Cost per Unit Value April 5 1000 $13 $13,000 April 27 600 $12.75 $ 7,650 May 12 700 $12.70 $ 8,890 May 29 1500 $12.55 $ 18,825 June 23 1750 $12.40 $ 21,700 Total Value (BB + Purchases) $115,915 Ending physical inventory at June 30th: 3,800 As a training piece, Ryan explained three different ways the value of remaining inventory and the cost of goods sold could be determined (FIFO, LIFO, Average Cost). He said that the method used by Blue Jeans by the Pound was selected to meet the following financial goal: to have the lowest income tax expense. This meant the company wanted to have the lowest taxable income, which happens when the company shows the lowest profits. Based on this goal, he asked Katherine to do the following: ⚫ Calculate the total number of units sold during the quarter Determine the value of the remaining inventory using FIFO and LIFO • Calculate the COGS under each method ⚫ Guess which method the company was using in order to meet its tax goals

"Cowboy Jeans" Line # of Units Cost per Unit Value Beginning Inventory Balance 3,500 $13.10 $ 45,850 Purchases # of Units Cost per Unit Value April 5 1000 $13 $13,000 April 27 600 $12.75 $ 7,650 May 12 700 $12.70 $ 8,890 May 29 1500 $12.55 $ 18,825 June 23 1750 $12.40 $ 21,700 Total Value (BB + Purchases) $115,915 Ending physical inventory at June 30th: 3,800 As a training piece, Ryan explained three different ways the value of remaining inventory and the cost of goods sold could be determined (FIFO, LIFO, Average Cost). He said that the method used by Blue Jeans by the Pound was selected to meet the following financial goal: to have the lowest income tax expense. This meant the company wanted to have the lowest taxable income, which happens when the company shows the lowest profits. Based on this goal, he asked Katherine to do the following: ⚫ Calculate the total number of units sold during the quarter Determine the value of the remaining inventory using FIFO and LIFO • Calculate the COGS under each method ⚫ Guess which method the company was using in order to meet its tax goals

FINANCIAL ACCOUNTING
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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"Cowboy Jeans" Line # of Units Cost per Unit Value Beginning Inventory Balance 3,500 $13.10 $ 45,850 Purchases # of Units Cost per Unit Value April 5 1000 $13 $13,000 April 27 600 $12.75 $ 7,650 May 12 700 $12.70 $ 8,890 May 29 1500 $12.55 $ 18,825 June 23 1750 $12.40 $ 21,700 Total Value (BB + Purchases) $115,915 Ending physical inventory at June 30th: 3,800 As a training piece, Ryan explained three different ways the value of remaining inventory and the cost of goods sold could be determined (FIFO, LIFO, Average Cost). He said that the method used by Blue Jeans by the Pound was selected to meet the following financial goal: to have the lowest income tax expense. This meant the company wanted to have the lowest taxable income, which happens when the company shows the lowest profits. Based on this goal, he asked Katherine to do the following: ⚫ Calculate the total number of units sold during the quarter Determine the value of the remaining inventory using FIFO and LIFO • Calculate the COGS under each method ⚫ Guess which method the company was using in order to meet its tax goals
Transcribed Image Text:"Cowboy Jeans" Line # of Units Cost per Unit Value Beginning Inventory Balance 3,500 $13.10 $ 45,850 Purchases # of Units Cost per Unit Value April 5 1000 $13 $13,000 April 27 600 $12.75 $ 7,650 May 12 700 $12.70 $ 8,890 May 29 1500 $12.55 $ 18,825 June 23 1750 $12.40 $ 21,700 Total Value (BB + Purchases) $115,915 Ending physical inventory at June 30th: 3,800 As a training piece, Ryan explained three different ways the value of remaining inventory and the cost of goods sold could be determined (FIFO, LIFO, Average Cost). He said that the method used by Blue Jeans by the Pound was selected to meet the following financial goal: to have the lowest income tax expense. This meant the company wanted to have the lowest taxable income, which happens when the company shows the lowest profits. Based on this goal, he asked Katherine to do the following: ⚫ Calculate the total number of units sold during the quarter Determine the value of the remaining inventory using FIFO and LIFO • Calculate the COGS under each method ⚫ Guess which method the company was using in order to meet its tax goals
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