Income is to be evaluated under four different situations as follows: a. Prices are rising: (1) Situation A: FIFO is used. (2) Situation B: LIFO is used. b. Prices are falling: (1) Situation C: FIFO is used. (2) Situation D: LIFO is used. The basic data common to all four situations are sales, 660 units for $19,800; beginning inventory, 490 units; purchases, 560 units; ending inventory, 390 units; and operating expenses, $6,500. The income tax rate is 30%. Required: 1. Complete the following tabulation for each situation. In Situations A and B (prices rising), assume the following: beginning inventory, 490 units at $14 = $6,860; purchases, 560 units at $15 = $8,400. In Situations C and D (prices falling), assume the opposite; that is, beginning inventory, 490 units at $15 = $7,350; purchases, 560 units at $14 = $7,840. Use periodic inventory procedures. 2. Complete the following sentence: 3. Complete the following sentence regarding the relative effects on the cash position for each situation. Required 1 Required 2 Required 3 Complete the following tabulation for each situation. In Situations A and B (prices rising), assume the following: beginning inventory, 490 units at $14 = $6,860; purchases, 560 units at $15 = $8,400. In Situations C and D (prices falling), assume the opposite; that is, beginning inventory, 490 units at $15 - $7,350; purchases, 560 units at $14 = $7,840. Use periodic inventory procedures. PRICES RISING Situation A FIFO Situation B LIFO PRICES FALLING Situation C FIFO Situation D LIFO Sales revenue $ 19,800 $ 19,800 $ 19,800 $ 19,800 Cost of goods sold: Beginning inventory 6,860 Purchases 8,400 Goods available for sale 15,260 Ending inventory 5,850 Cost of goods sold 9,410 Gross profit 10,390 Expenses 6,500 6,500 6,500 6,500 Pretax income 3,890 Income tax expense 1,167 Net income S 2,723 Required 1 Required 2 >
Income is to be evaluated under four different situations as follows: a. Prices are rising: (1) Situation A: FIFO is used. (2) Situation B: LIFO is used. b. Prices are falling: (1) Situation C: FIFO is used. (2) Situation D: LIFO is used. The basic data common to all four situations are sales, 660 units for $19,800; beginning inventory, 490 units; purchases, 560 units; ending inventory, 390 units; and operating expenses, $6,500. The income tax rate is 30%. Required: 1. Complete the following tabulation for each situation. In Situations A and B (prices rising), assume the following: beginning inventory, 490 units at $14 = $6,860; purchases, 560 units at $15 = $8,400. In Situations C and D (prices falling), assume the opposite; that is, beginning inventory, 490 units at $15 = $7,350; purchases, 560 units at $14 = $7,840. Use periodic inventory procedures. 2. Complete the following sentence: 3. Complete the following sentence regarding the relative effects on the cash position for each situation. Required 1 Required 2 Required 3 Complete the following tabulation for each situation. In Situations A and B (prices rising), assume the following: beginning inventory, 490 units at $14 = $6,860; purchases, 560 units at $15 = $8,400. In Situations C and D (prices falling), assume the opposite; that is, beginning inventory, 490 units at $15 - $7,350; purchases, 560 units at $14 = $7,840. Use periodic inventory procedures. PRICES RISING Situation A FIFO Situation B LIFO PRICES FALLING Situation C FIFO Situation D LIFO Sales revenue $ 19,800 $ 19,800 $ 19,800 $ 19,800 Cost of goods sold: Beginning inventory 6,860 Purchases 8,400 Goods available for sale 15,260 Ending inventory 5,850 Cost of goods sold 9,410 Gross profit 10,390 Expenses 6,500 6,500 6,500 6,500 Pretax income 3,890 Income tax expense 1,167 Net income S 2,723 Required 1 Required 2 >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Income is to be evaluated under four different situations as follows:
a. Prices are rising:
(1) Situation A: FIFO is used.
(2) Situation B: LIFO is used.
b. Prices are falling:
(1) Situation C: FIFO is used.
(2) Situation D: LIFO is used.
The basic data common to all four situations are sales, 660 units for $19,800; beginning inventory, 490 units; purchases, 560 units;
ending inventory, 390 units; and operating expenses, $6,500. The income tax rate is 30%.
Required:
1. Complete the following tabulation for each situation. In Situations A and B (prices rising), assume the following: beginning
inventory, 490 units at $14 = $6,860; purchases, 560 units at $15 = $8,400. In Situations C and D (prices falling), assume the
opposite; that is, beginning inventory, 490 units at $15 = $7,350; purchases, 560 units at $14 = $7,840. Use periodic inventory
procedures.
2. Complete the following sentence:
3. Complete the following sentence regarding the relative effects on the cash position for each situation.
Required 1
Required 2
Required 3
Complete the following tabulation for each situation. In Situations A and B (prices rising), assume the following: beginning
inventory, 490 units at $14 = $6,860; purchases, 560 units at $15 = $8,400. In Situations C and D (prices falling), assume
the opposite; that is, beginning inventory, 490 units at $15 = $7,350; purchases, 560 units at $14 = $7,840. Use periodic
inventory procedures.
PRICES RISING
Situation A
FIFO
Situation B
LIFO
PRICES FALLING
Situation C
FIFO
Sales revenue
$
19,800 $
19,800 $
Situation D
LIFO
19,800 $
19,800
Cost of goods sold:
Beginning inventory
6,860
Purchases
8,400
Goods available for sale
15,260
Ending inventory
5,850
Cost of goods sold
9,410
Gross profit
10,390
Expenses
6,500
6,500
6,500
6,500
Pretax income
3,890
Income tax expense
1,167
Net income
$
2,723
< Required 1
Required 2 >
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 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