Overton Company uses a perpetual inventory system for its single product. Its beginning inventory, purchases and sales during calendar year 2021 follow. Jan 1 Beginning inventory $5,600 Jan 15 Sold 200 units @ $30.00 March 10 Purchase 200 units @ $15 April 1 Sold 200 units @ $30 May 9 Purchased 300 units @ $16 Sept 22 Purchase 250 units @ $20 Nov 1 Sold 300 units @ $35 Nov 28 Purchased 100 units @21 Given that expenses after gross profit totalled $ 5,000.00, compute the gross and net profit earned by the company under the LIFO and AVCO costing methods. If the company had used the FIFO inventory costing method, cost of goods sold under FIFO would have been $ 10,200.00. Management wants a report that shows how changing from FIFO to another method would change net income. Prepare a table showing (1) the amount by which cost of goods sold under LIFO and AVCO is different from the FIFO cost of goods sold and ( 2) the effect on net income when LIFO and AVCO are used instead of FIFO. When costs are rising, what is the effect of the FIFO inventory valuation approach on cost of goods sold, gross profit and net income? Why?
Overton Company uses a perpetual inventory system for its single product. Its beginning inventory, purchases and sales during calendar year 2021 follow. Jan 1 Beginning inventory $5,600 Jan 15 Sold 200 units @ $30.00 March 10 Purchase 200 units @ $15 April 1 Sold 200 units @ $30 May 9 Purchased 300 units @ $16 Sept 22 Purchase 250 units @ $20 Nov 1 Sold 300 units @ $35 Nov 28 Purchased 100 units @21 Given that expenses after gross profit totalled $ 5,000.00, compute the gross and net profit earned by the company under the LIFO and AVCO costing methods. If the company had used the FIFO inventory costing method, cost of goods sold under FIFO would have been $ 10,200.00. Management wants a report that shows how changing from FIFO to another method would change net income. Prepare a table showing (1) the amount by which cost of goods sold under LIFO and AVCO is different from the FIFO cost of goods sold and ( 2) the effect on net income when LIFO and AVCO are used instead of FIFO. When costs are rising, what is the effect of the FIFO inventory valuation approach on cost of goods sold, gross profit and net income? Why?
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter6: Cost Of Goods Sold And Inventory
Section: Chapter Questions
Problem 62E
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Overton Company uses a perpetual inventory system for its single product. Its beginning inventory, purchases and sales during calendar year 2021 follow.
Jan 1 Beginning inventory $5,600
Jan 15 Sold 200 units @ $30.00
March 10 Purchase 200 units @ $15
April 1 Sold 200 units @ $30
May 9 Purchased 300 units @ $16
Sept 22 Purchase 250 units @ $20
Nov 1 Sold 300 units @ $35
Nov 28 Purchased 100 units @21
- Given that expenses after gross profit totalled $ 5,000.00, compute the gross and net profit earned by the company under the LIFO and AVCO costing methods.
- If the company had used the FIFO inventory costing method, cost of goods sold under FIFO would have been $ 10,200.00. Management wants a report that shows how changing from FIFO to another method would change net income. Prepare a table showing (1) the amount by which cost of goods sold under LIFO and AVCO is different from the FIFO cost of goods sold and ( 2) the effect on net income when LIFO and AVCO are used instead of FIFO.
- When costs are rising, what is the effect of the FIFO
inventory valuation approach on cost of goods sold, gross profit and net income? Why?
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