Heller Bottling Company began business in 2011, and ceased operations in 2015. Inventory units purchased and sold for the five years follow: Units Purchased Cost per Unit Units Sold 2011 10,000 12 5,000 2012 12,000 16 16,000 2013 5,000 18 2,000 2014 10,000 21 10,000 2015 2,000 23 6,000
Heller Bottling Company began business in 2011, and ceased operations in 2015. Inventory units
purchased and sold for the five years follow:
Units Purchased Cost per Unit Units Sold
2011 10,000 12 5,000
2012 12,000 16 16,000
2013 5,000 18 2,000
2014 10,000 21 10,000
2015 2,000 23 6,000
a. Compute cost of goods sold for each of the five years if the company uses the following:
a. LIFO
b. FIFO
c. Average cost (round cost/unit to two decimals, and COGS to the nearest dollar)
b. Does the choice of a cost flow assumption affect total net income over the life of a
business? Explain.
c. If the choice of a cost flow assumption does not affect net income over the life of a
business, how does the choice of LIFO give rise to a tax benefit?
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