ojo Industries tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the accounting period, January 31. The inventory’s selling price is $12 per unit. Transactions Unit Cost Units Total Cost Inventory, January 1 $ 4.00 190 $ 760 Sale, January 10 (170 ) Purchase, January 12 4.50 240 1,080 Sale, January 17 (110 ) Purchase, January 26 5.50 70 385 Assume that for Specific identification method the January 10 sale was from the beginning inventory and the January 17 sale was from the January 12 purchase. Required: Compute the amount of goods available for sale, ending inventory, and cost of goods sold at January 31 under each of the following inventory costing methods: (Round your intermediate calculations to 2 decimal places and final answers to the nearest dollar amount.) 2-a. Of the four methods, which will result in the highest gross profit? Weighted average cost First-in, first-out Last-in, first-out Specific identification 2-b.Of the four methods, which will result in the lowest income taxes? Weighted average cost First-in, first-out Last-in, first-out Specific identification

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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ojo Industries tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the accounting period, January 31. The inventory’s selling price is $12 per unit.

Transactions	Unit Cost	Units	Total Cost
Inventory, January 1	$	4.00		190		$	760
Sale, January 10				(170	)
Purchase, January 12		4.50		240			1,080
Sale, January 17				(110	)
Purchase, January 26		5.50		70			385

Assume that for Specific identification method the January 10 sale was from the beginning inventory and the January 17 sale was from the January 12 purchase.

Required:

Compute the amount of goods available for sale, ending inventory, and cost of goods sold at January 31 under each of the following inventory costing methods: (Round your intermediate calculations to 2 decimal places and final answers to the nearest dollar amount.)

2-a. Of the four methods, which will result in the highest gross profit?

Weighted average cost
First-in, first-out
Last-in, first-out
Specific identification

2-b.Of the four methods, which will result in the lowest income taxes?

Weighted average cost
First-in, first-out
Last-in, first-out
Specific identification

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