Navy Seals Surplus began July 2021 with 80 stoves that cost $15 each. During the month, the company made thefollowing purchases at cost:(Click the icon to view the purchases.)The company sold 252 stoves, and at July 31, the ending inventory consisted of 68 stoves. The sales price of eachstove was $53.Read the requirements.Requirement 1. Determine the cost of goods sold and ending inventory amounts for July under the average-cost, FIFO,and LIFO costing methods. Round the average cost per unit to two decimal places, and round all other amounts to thenearest dollar.Number of unitsAverage costRequirementsFIFOCost of goods sold$$Ending inventoryRequirement 2. Explain why cost of goods sold is highest under LIFO. Be specific.Under LIFO the cost of goods sold is the highest because costs are rising and LIFO assigns the most recent units purchased to cost of goods sold.1. Determine the cost of goods sold and ending inventory amounts for July underthe average-cost, FIFO, and LIFO costing methods. Round the average costper unit to two decimal places, and round all other amounts to the nearestdollar.$$2. Explain why cost of goods sold is highest under LIFO. Be specific.3. Prepare the Navy Seals Surplus income statement for July. Report grossprofit. Operating expenses totaled $4,000. The company uses average costingfor inventory. The income tax rate is 30%.LIFOSales revenueCost of goods soldGross profitOperating expensesIncome before income taxesIncome tax expenseNet income$Data tableJuly 6July 18July 2690 stoves @120 stoves @30 stoves @$20$24$28 ==$ 1,8002,880840

Sales Revenue = 252 units @ $53 = $13,356 Opening Stock = 80 units @ $15 = $1,200 Total purchases = $1800 + $2880 + $840 = $5520Particulars Units Average cost FIFO LIFO COST OF GOODS SOLD 252 252 × $21 = $5292 1200+1800+(82×24) = 4968 840+2880+1800+(12×15) = $5700 ENDING INVENTORY 68 68 × $21 = $1428 $1752 $1020 For Average cost calculation Opening Stock + Total purchases = $1200 + $5520 = $6720 Total units = 80 + 90 + 120 + 30 = 320 units Average cost = $6720/320 = $21 For FIFO calculation CLOSING INVENTORY WILL BE ON THE BASIS OF LAST PURCHASES 68 STOCK LEFT, OF WHICH 30 UNITS IS OF JULY 26 PURCHASES AND REMAINING 38 IS FROM JULY 18 PURCHASES THEREFORE, VALUE = (30 ×$28) +(38 × $24) =$1752 For LIFO calculation CLOSING INVENTORY WILL BE ON THE BASIS OF FIRST PURCHASES 68 STOCK LEFT, IT IS FROM OPENING STOCK THEREFORE, VALUE = (68 ×$15) = $1020 Sales Revenue $13,356 - Cost of Goods sold ($5292) Gross profit $8064 - Operating expenses ($4000) Income before Income tax $4064 - Income tax expense @30% ($1219.20) Net Income $2844.80

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Navy Seals Surplus began July 2021 with 80 stoves that cost $15 each. During the month, the company made the following purchases at cost: (Click the icon to view the purchases.) The company sold 252 stoves, and at July 31, the ending inventory consisted of 68 stoves. The sales price of each stove was $53. Read the requirements. Requirement 1. Determine the cost of goods sold and ending inventory amounts for July under the average-cost, FIFO, and LIFO costing methods. Round the average cost per unit to two decimal places, and round all other amounts to the nearest dollar. Number of units Average cost FIFO Cost of goods sold $ Ending inventory $ Requirement 2. Explain why cost of goods sold is highest under LIFO. Be specific. LIFO

Navy Seals Surplus began July 2021 with 80 stoves that cost $15 each. During the month, the company made the following purchases at cost: (Click the icon to view the purchases.) The company sold 252 stoves, and at July 31, the ending inventory consisted of 68 stoves. The sales price of each stove was $53. Read the requirements. Requirement 1. Determine the cost of goods sold and ending inventory amounts for July under the average-cost, FIFO, and LIFO costing methods. Round the average cost per unit to two decimal places, and round all other amounts to the nearest dollar. Number of units Average cost FIFO Cost of goods sold $ Ending inventory $ Requirement 2. Explain why cost of goods sold is highest under LIFO. Be specific. LIFO

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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