Effects of Inventory Costing MethodsJefferson Enterprises has the following income statement data available for the year:Sales revenue$737,200Operating expenses243,700Interest expense39,500Income tax rate34%Jefferson uses a perpetual inventory accounting system and the average cost method. Jefferson is considering adopting the FIFO or LIFO method for costing inventory. Jefferson's accountant prepared the following data: If Average Cost UsedIf FIFO UsedIf LIFO UsedEnding inventory$65,950 $78,500 $40,100 Cost of goods sold399,050 386,500 424,900 Required:1. Compute income before taxes, income taxes expense, and net income for each of the three inventory costing methods. (Round to the nearest dollar.) Average CostFIFOLIFOIncome before taxes$fill in the blank 1$fill in the blank 2$fill in the blank 3Income tax expense$fill in the blank 4$fill in the blank 5$fill in the blank 6Net income$fill in the blank 7$fill in the blank 8$fill in the blank 92. Conceptual Connection: Which method produces the most realistic amount for net income? For inventory?For net income For inventory

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Description: Effects of Inventory Costing MethodsJefferson Enterprises has the following income statement data available for the year:Sales revenue$737,200Operating expenses243,700Interest expense39,500Income tax rate34%Jefferson uses a perpetual inventory accoun

The inventory can be valued using various methods as FIFO, LIFO and weighted average method. Using…

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Effects of Inventory Costing Methods

Jefferson Enterprises has the following income statement data available for the year:

Sales revenue	$737,200
Operating expenses	243,700
Interest expense	39,500
Income tax rate	34%

Jefferson uses a perpetual inventory accounting system and the average cost method. Jefferson is considering adopting the FIFO or LIFO method for costing inventory. Jefferson's accountant prepared the following data:

	If Average Cost Used	If FIFO Used	If LIFO Used
Ending inventory	$65,950		$78,500	$40,100
Cost of goods sold	399,050		386,500	424,900

Required:

1. Compute income before taxes, income taxes expense, and net income for each of the three inventory costing methods. (Round to the nearest dollar.)

	Average Cost	FIFO	LIFO
Income before taxes	$fill in the blank 1	$fill in the blank 2	$fill in the blank 3
Income tax expense	$fill in the blank 4	$fill in the blank 5	$fill in the blank 6
Net income	$fill in the blank 7	$fill in the blank 8	$fill in the blank 9

2. Conceptual Connection: Which method produces the most realistic amount for net income? For inventory?

For net income
For inventory

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