LO7-2 M7-20. Computing Cost of Goods Sold and Ending Inventory Under FIFO, LIFO, and Average Cost Assume that Gode Company reports the following initial balance and subsequent purchase of inventory. MBC Beginning inventory.... Inventory purchased during the year Cost of goods available for sale... 2,500 units @ $100 each 5,000 units @ $150 each 7,500 units $ 250,000 750,000 $1,000,000 Assume that 4,250 units are sold during the year. Compute the cost of goods sold for the year and the balance reported as ending inventory on its year-end balance sheet under the following inven- tory costing methods: a. FIFO b. LIFO c. Average cost

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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7-33
Chapter 7 Reporting and Analyzing Inventory
a.
b.
C.
Construct a projected balance sheet as of the end of December, Year 1.
Construct financial forecasts of income statements, cash flows (direct method) and balance
sheets for the next three years (through Year 4). Assume that your business would operate in a
tax jurisdiction that requires the use of FIFO for inventory. Would this opportunity meet your
financial objective?
Suppose that your business would operate in a tax jurisdiction that allowed the use of LIFO for
inventory. Would this opportunity meet your financial objective? Why?
Ⓒ Cambridge Business Publishers
LO7-2 M7-20. Computing Cost of Goods Sold and Ending Inventory Under FIFO, LIFO, and Average Cost
Assume that Gode Company reports the following initial balance and subsequent purchase of
inventory.
Beginning inventory...
Inventory purchased during the year.
Cost of goods available for sale
b.
2,500 units @ $100 each
5,000 units @ $150 each
7,500 units
Assume that 4,250 units are sold during the year. Compute the cost of goods sold for the year and
the balance reported as ending inventory on its year-end balance sheet under the following inven-
tory costing methods:
a.
FIFO
LIFO
Average cost
$ 250,000
750,000
$1,000,000
C.
Transcribed Image Text:7-33 Chapter 7 Reporting and Analyzing Inventory a. b. C. Construct a projected balance sheet as of the end of December, Year 1. Construct financial forecasts of income statements, cash flows (direct method) and balance sheets for the next three years (through Year 4). Assume that your business would operate in a tax jurisdiction that requires the use of FIFO for inventory. Would this opportunity meet your financial objective? Suppose that your business would operate in a tax jurisdiction that allowed the use of LIFO for inventory. Would this opportunity meet your financial objective? Why? Ⓒ Cambridge Business Publishers LO7-2 M7-20. Computing Cost of Goods Sold and Ending Inventory Under FIFO, LIFO, and Average Cost Assume that Gode Company reports the following initial balance and subsequent purchase of inventory. Beginning inventory... Inventory purchased during the year. Cost of goods available for sale b. 2,500 units @ $100 each 5,000 units @ $150 each 7,500 units Assume that 4,250 units are sold during the year. Compute the cost of goods sold for the year and the balance reported as ending inventory on its year-end balance sheet under the following inven- tory costing methods: a. FIFO LIFO Average cost $ 250,000 750,000 $1,000,000 C.
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