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Lunar Company uses a perpetual inventory system. The company's accounting records provided the following information for Product 2: Transactions a. Inventory, December 31, 2019 For the year 2020: b. Purchase, April 11 c. Sale, May 1 ($30 each) d. Purchase, June 1 e. Sale, July 3 ($30 each) f. Operating expenses (excluding income tax expense), $85,600 Cost of sales: Units Unit Cos 3,600 $12 Required: 1. Prepare a statement of earnings for 2020, through pretax earnings, showing the detailed computation of cost of sales for two cases: LUNAR COMPANY Statement of Earnings (Partial) For the Year Ended December 31, 2020 Case A FIFO 9,600 5,600 a. Case A-FIFO b. Case B-Weighted average (Round intermediate calculations to 2 decimal places.) Case B Weighted Average 8,600 6,600 10 13

Lunar Company uses a perpetual inventory system. The company's accounting records provided the following information for Product 2: Transactions a. Inventory, December 31, 2019 For the year 2020: b. Purchase, April 11 c. Sale, May 1 ($30 each) d. Purchase, June 1 e. Sale, July 3 ($30 each) f. Operating expenses (excluding income tax expense), $85,600 Cost of sales: Units Unit Cos 3,600 $12 Required: 1. Prepare a statement of earnings for 2020, through pretax earnings, showing the detailed computation of cost of sales for two cases: LUNAR COMPANY Statement of Earnings (Partial) For the Year Ended December 31, 2020 Case A FIFO 9,600 5,600 a. Case A-FIFO b. Case B-Weighted average (Round intermediate calculations to 2 decimal places.) Case B Weighted Average 8,600 6,600 10 13

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Lunar Company uses a perpetual inventory system. The company's accounting records provided the following information for Product 2: Transactions a. Inventory, December 31, 2019 For the year 2020: b. Purchase, April 11 c. Sale, May 1 ($30 each) d. Purchase, June 1 e. Sale, July 3 ($30 each) f. Operating expenses (excluding income tax expense), $85,600 Required: 1. Prepare a statement of earnings for 2020, through pretax earnings, showing the detailed computation of cost of sales for two cases: Cost of sales: a. Case A-FIFO b. Case B-Weighted average (Round intermediate calculations to 2 decimal places.) LUNAR COMPANY Statement of Earnings (Partial) For the Year Ended December 31, 2020 Case A Units Unit Cos 3,600 $12 FIFO 9,600 5,600 8,600 6,600 Case B Weighted Average 10 13
Transcribed Image Text:Lunar Company uses a perpetual inventory system. The company's accounting records provided the following information for Product 2: Transactions a. Inventory, December 31, 2019 For the year 2020: b. Purchase, April 11 c. Sale, May 1 ($30 each) d. Purchase, June 1 e. Sale, July 3 ($30 each) f. Operating expenses (excluding income tax expense), $85,600 Required: 1. Prepare a statement of earnings for 2020, through pretax earnings, showing the detailed computation of cost of sales for two cases: Cost of sales: a. Case A-FIFO b. Case B-Weighted average (Round intermediate calculations to 2 decimal places.) LUNAR COMPANY Statement of Earnings (Partial) For the Year Ended December 31, 2020 Case A Units Unit Cos 3,600 $12 FIFO 9,600 5,600 8,600 6,600 Case B Weighted Average 10 13
2. Calculate the pretax earnings and the ending inventory amounts between the two cases. Pretax earnings Difference Ending inventory Difference 3. Which inventory costing method may be preferred for income tax purposes? OFIFO Weighted Average Show Transcribed Text View transaction list < Journal entry worksheet Comparison of Amounts Case A Case B FIFO Weighted Average 4. Prepare journal entries to record transactions (b) through (e), assuming that all sales and purchase transactions are on that Scoresby uses FIFO for inventory costing. (If no entry is required for a transaction/event, select "No journal entry n the first account field.) 1 2 3 Transaction b. Note: Enter debits before credits. 4 Record purchase of goods on account. 5 General Journal 6 Prou 7 7 of 17 223 Debit Credit Navt S >
Transcribed Image Text:2. Calculate the pretax earnings and the ending inventory amounts between the two cases. Pretax earnings Difference Ending inventory Difference 3. Which inventory costing method may be preferred for income tax purposes? OFIFO Weighted Average Show Transcribed Text View transaction list < Journal entry worksheet Comparison of Amounts Case A Case B FIFO Weighted Average 4. Prepare journal entries to record transactions (b) through (e), assuming that all sales and purchase transactions are on that Scoresby uses FIFO for inventory costing. (If no entry is required for a transaction/event, select "No journal entry n the first account field.) 1 2 3 Transaction b. Note: Enter debits before credits. 4 Record purchase of goods on account. 5 General Journal 6 Prou 7 7 of 17 223 Debit Credit Navt S >
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