Orion Iron Corporation tracks the number of units purchased and sold throughout each year but applies its inventory costing method at the end of the year, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31. Transactions Units Unit Cost a. Inventory, Beginning 300 $ 13 For the year: b. Purchase, April 11 900 11 c. Purchase, June 1 800 14 d. Sale, May 1 (sold for $41 per unit) 300 e. Sale, July 3 (sold for $41 per unit) 620 f. Operating expenses (excluding income tax expense), $18,100 Required: 1. Calculate the number and cost of goods available for sale. 2. Calculate the number of units in ending inventory. 3. Compute the cost of ending inventory and cost of goods sold under (a) FIFO, (b) LIFO, and (c) weighted average cost. 4. Prepare an income statement that shows under the FIFO method, LIFO method and weighted average method. 6. Which inventory costing method minimizes income taxes?
Orion Iron Corporation tracks the number of units purchased and sold throughout each year but applies its inventory costing method at the end of the year, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31. Transactions Units Unit Cost a. Inventory, Beginning 300 $ 13 For the year: b. Purchase, April 11 900 11 c. Purchase, June 1 800 14 d. Sale, May 1 (sold for $41 per unit) 300 e. Sale, July 3 (sold for $41 per unit) 620 f. Operating expenses (excluding income tax expense), $18,100 Required: 1. Calculate the number and cost of goods available for sale. 2. Calculate the number of units in ending inventory. 3. Compute the cost of ending inventory and cost of goods sold under (a) FIFO, (b) LIFO, and (c) weighted average cost. 4. Prepare an income statement that shows under the FIFO method, LIFO method and weighted average method. 6. Which inventory costing method minimizes income taxes?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Orion Iron Corporation tracks the number of units purchased and sold throughout each year but applies its inventory costing method at the end of the year, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.
| Transactions | Units | Unit Cost |
|---|---|---|
| a. Inventory, Beginning | 300 | $ 13 |
| For the year: | ||
| b. Purchase, April 11 | 900 | 11 |
| c. Purchase, June 1 | 800 | 14 |
| d. Sale, May 1 (sold for $41 per unit) | 300 | |
| e. Sale, July 3 (sold for $41 per unit) | 620 | |
| f. Operating expenses (excluding income tax expense), $18,100 |
Required:
- 1. Calculate the number and cost of goods available for sale.
- 2. Calculate the number of units in ending inventory.
- 3. Compute the cost of ending inventory and cost of goods sold under (a) FIFO, (b) LIFO, and (c) weighted average cost.
- 4. Prepare an income statement that shows under the FIFO method, LIFO method and weighted average method.
- 6. Which inventory costing method minimizes income taxes?
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