Heyman Mayonaisse Ltd. imports mayonnaise from its mother company and distributes it to restaurants in Ireland in one large format. Since all the products are identical and the Irish company is small and short of admin personnel, the management has decided to assess the cost of goods sold only at the end of the year. About to end its first year of operations, the management needs to determine what inventory method to apply. The following data corresponds to 2022: Purchases Jan 1, 2022 Feb 17, 2022 Mar 23, 2022 Jul 21, 2022 Oct 29, 2022 Nov 17, 2022 Dec 15, 2022 40 @ 9€ 360€ 30 @ 11€ = 330€ 60 @ 12€ 720€ Sold 60@15€ 900€ 40 @ 20€ 800€ 25 @ 20€ = 500€ Inventory 70 @9 € 630€ Required: (Solve this exercise on the ANSWER SHEET) a. With the previous information, prepare a comparison of Income Statements for the year ended by filling the corresponding table from the ANSWER SHEET, contrasting FIFO, LIFO and Weighted-Average inventory valuation methods. Assume that "Other Expenses" for the year are 275€, and the applicable income tax rate is 20%. (0.4 points for each method, distributed as: 0.3 points for correct COGS, 0.1 points for correct net income) b. Briefly explain the pros and cons of choosing LIFO instead of FIFO. (0.3 points)
Heyman Mayonaisse Ltd. imports mayonnaise from its mother company and distributes it to restaurants in Ireland in one large format. Since all the products are identical and the Irish company is small and short of admin personnel, the management has decided to assess the cost of goods sold only at the end of the year. About to end its first year of operations, the management needs to determine what inventory method to apply. The following data corresponds to 2022: Purchases Jan 1, 2022 Feb 17, 2022 Mar 23, 2022 Jul 21, 2022 Oct 29, 2022 Nov 17, 2022 Dec 15, 2022 40 @ 9€ 360€ 30 @ 11€ = 330€ 60 @ 12€ 720€ Sold 60@15€ 900€ 40 @ 20€ 800€ 25 @ 20€ = 500€ Inventory 70 @9 € 630€ Required: (Solve this exercise on the ANSWER SHEET) a. With the previous information, prepare a comparison of Income Statements for the year ended by filling the corresponding table from the ANSWER SHEET, contrasting FIFO, LIFO and Weighted-Average inventory valuation methods. Assume that "Other Expenses" for the year are 275€, and the applicable income tax rate is 20%. (0.4 points for each method, distributed as: 0.3 points for correct COGS, 0.1 points for correct net income) b. Briefly explain the pros and cons of choosing LIFO instead of FIFO. (0.3 points)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Question 3 (1.5 points)
Heyman Mayonaisse Ltd. imports mayonnaise from its mother company and distributes it to
restaurants in Ireland in one large format. Since all the products are identical and the Irish company
is small and short of admin personnel, the management has decided to assess the cost of goods sold
only at the end of the year. About to end its first year of operations, the management needs to
determine what inventory method to apply.
The following data corresponds to 2022:
Purchases
Jan 1, 2022
Feb 17, 2022
Mar 23, 2022
Jul 21, 2022
Oct 29, 2022
Nov 17, 2022
Dec 15, 2022
40 @ 9€ = 360€
30 @ 11€ 330€
60 @ 12€ = 720€
Sold
60 @ 15€ = 900€
40 @ 20€ 800€
25 @ 20€ = 500€
Inventory
70 @ 9 € = 630€
Required: (Solve this exercise on the ANSWER SHEET)
a. With the previous information, prepare a comparison of Income Statements for the year
ended by filling the corresponding table from the ANSWER SHEET, contrasting FIFO,
LIFO and Weighted-Average inventory valuation methods. Assume that "Other Expenses"
for the year are 275€, and the applicable income tax rate is 20%. (0.4 points for each
method, distributed as: 0.3 points for correct COGS, 0.1 points for correct net
income)
b. Briefly explain the pros and cons of choosing LIFO instead of FIFO. (0.3 points)
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