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:
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:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Topic Video
Question
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 |
|
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education