Daniel Company uses a periodic inventory system. Data for the current year: beginning merchandise inventory (ending inventory December 31, prior year), 2,150 units at $35; purchases, 7,890 units at $37; expenses (excluding income taxes), $194,000; ending inventory per physical count at December 31, current year, 1,790 units; sales, 8,250 units; sales price per unit, $78; and average income tax rate, 32 percent. Required: 1-a. Compute cost of goods sold under the FIFO, LIFO, and average cost inventory costing methods. 1-b. Prepare income statements under the FIFO, LIFO, and average cost inventory costing methods. 2. Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow)? 3. Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow), assuming that prices were falling? Complete this question by entering your answers in the tabs below. Req 1a Req 1b Req 2 Req 3 Prepare income statements under the FIFO, LIFO, and average cost inventory costing methods. Note: Do not round your intermediate calculations. Round your final answers to the nearest whole dollar amount. Use the COGS amount from Required 1a. Income Statement Sales Revenue Cost of goods sold Gross profit Operating expenses Pretax income Income tax expense Net income FIFO LIFO Average Cost < Req 1a Req 2 >
Daniel Company uses a periodic inventory system. Data for the current year: beginning merchandise inventory (ending inventory December 31, prior year), 2,150 units at $35; purchases, 7,890 units at $37; expenses (excluding income taxes), $194,000; ending inventory per physical count at December 31, current year, 1,790 units; sales, 8,250 units; sales price per unit, $78; and average income tax rate, 32 percent. Required: 1-a. Compute cost of goods sold under the FIFO, LIFO, and average cost inventory costing methods. 1-b. Prepare income statements under the FIFO, LIFO, and average cost inventory costing methods. 2. Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow)? 3. Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow), assuming that prices were falling? Complete this question by entering your answers in the tabs below. Req 1a Req 1b Req 2 Req 3 Prepare income statements under the FIFO, LIFO, and average cost inventory costing methods. Note: Do not round your intermediate calculations. Round your final answers to the nearest whole dollar amount. Use the COGS amount from Required 1a. Income Statement Sales Revenue Cost of goods sold Gross profit Operating expenses Pretax income Income tax expense Net income FIFO LIFO Average Cost < Req 1a Req 2 >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Daniel Company uses a periodic inventory system. Data for the current year: beginning merchandise inventory (ending inventory
December 31, prior year), 2,150 units at $35; purchases, 7,890 units at $37; expenses (excluding income taxes), $194,000; ending
inventory per physical count at December 31, current year, 1,790 units; sales, 8,250 units; sales price per unit, $78; and average income
tax rate, 32 percent.
Required:
1-a. Compute cost of goods sold under the FIFO, LIFO, and average cost inventory costing methods.
1-b. Prepare income statements under the FIFO, LIFO, and average cost inventory costing methods.
2. Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow)?
3. Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow), assuming that
prices were falling?
Complete this question by entering your answers in the tabs below.
Req 1a
Req 1b
Req 2
Req 3
Prepare income statements under the FIFO, LIFO, and average cost inventory costing methods.
Note: Do not round your intermediate calculations. Round your final answers to the nearest whole dollar amount. Use the
COGS amount from Required 1a.
Income Statement
Sales Revenue
Cost of goods sold
Gross profit
Operating expenses
Pretax income
Income tax expense
Net income
FIFO
LIFO
Average Cost
< Req 1a
Req 2 >
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Step 1: Introduction of period inventory system
VIEWStep 2: Requirement 1a - Computation of cost of goods sold under FIFO, LIFO, and average cost method
VIEWStep 3: Requirement 1b - Prepare income statement under FIFO, LIFO, and average cost method
VIEWStep 4: Requirement 2 - Determine which method is preferable in terms of net income and income taxes
VIEWStep 5: Requirement 3 - Determine which method is preferable in terms of net income and income taxes
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