Daniel Company uses a periodic inventory system. Data for the current year: beginning merchandise inventory (ending inventory December 31, prior year), 2,040 units at $37; purchases, 7,900 units at $39; expenses (excluding income taxes), $192,900; ending inventory per physical count at December 31, current year, 1,610 units; sales, 8,330 units; sales price per unit, $78; and average income tax rate, 30 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?
Daniel Company uses a periodic inventory system. Data for the current year: beginning merchandise inventory (ending inventory December 31, prior year), 2,040 units at $37; purchases, 7,900 units at $39; expenses (excluding income taxes), $192,900; ending inventory per physical count at December 31, current year, 1,610 units; sales, 8,330 units; sales price per unit, $78; and average income tax rate, 30 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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Topic Video
Question
Subject: accounting

Transcribed Image Text:Daniel Company uses a periodic inventory system. Data for the current year: beginning merchandise inventory (ending
inventory December 31, prior year), 2,040 units at $37; purchases, 7,900 units at $39; expenses (excluding income
taxes), $192,900; ending inventory per physical count at December 31, current year, 1,610 units; sales, 8,330 units; sales
price per unit, $78; and average income tax rate, 30 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 la Req 1b Req 2 Req 3
Compute cost of goods sold 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.
Cost of Goods Sold
Beginning inventory
Purchases
Goods available for
sale
Ending inventory
Cost of goods sold
Units
Inventory Costing Method
FIFO
LIFO
2,040
7,900
9,940
1,610
8,330
Req 1a
0
0
Average
Cost
Req 1b >
0
Show less A

Transcribed Image Text: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
$
$
649,740 649,740
< Req 1a
Average
Cost
$ 649,740
Req 2 >
Show less
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