ncome is to be evaluated under four different situations as follows: ■. Prices are rising: 1) Situation A: FIFO is used. 2) Situation B: LIFO is used. . Prices are falling: Situation C: FIFO is used. 2) Situation D: LIFO is used. The basic data common to all four situations are sales, 500 units for $15,000; beginning inventory, 300 units; purc ending inventory, 200 units; and operating expenses, $4,000. The income tax rate is 30%. Required: 1. Complete the following tabulation for each situation. In Situations A and B (prices rising), assume the followin
ncome is to be evaluated under four different situations as follows: ■. Prices are rising: 1) Situation A: FIFO is used. 2) Situation B: LIFO is used. . Prices are falling: Situation C: FIFO is used. 2) Situation D: LIFO is used. The basic data common to all four situations are sales, 500 units for $15,000; beginning inventory, 300 units; purc ending inventory, 200 units; and operating expenses, $4,000. The income tax rate is 30%. Required: 1. Complete the following tabulation for each situation. In Situations A and B (prices rising), assume the followin
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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, 500 units for $15,000; beginning inventory, 300 units; purchases, 400 units;
ending inventory, 200 units; and operating expenses, $4,000. 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, 300 units at $11 = $3,300; purchases, 400 units at $12 = $4,800. In Situations C and D (prices falling), assume the
opposite; that is, beginning inventory, 300 units at $12 = $3,600; purchases, 400 units at $11 - $4,400. 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.
Complete this question by entering your answers in the tabs below.
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, 300 units at $11 = $3,300; purchases, 400 units at $12 = $4,800. In Situations C and D (prices falling),
assume the opposite; that is, beginning inventory, 300 units at $12 = $3,600; purchases, 400 units at $11 = $4,400. Use
periodic inventory procedures.
PRICES RISING
Situation A
FIFO
Situation B
LIFO
PRICES FALLING
Situation C
FIFO
Sales revenue
$
15,000 $
15,000 $
Situation D
LIFO
15,000 $
15,000
Cost of goods sold:
Beginning inventory
3,300
Purchases
4,800
Goods available for sale
8,100
Ending inventory
2,400
Cost of goods sold
5,700
Gross profit
9,300
Expenses
4,000
4,000
4,000
4,000
Pretax income
5,300
Income tax expense
1,590
Net income
$
3,710
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