P6-4B The management of Weigel Inc. asks your help in determıning the compal tive effects of the FIFO and LIFO inventory cost flow methods. For 2014 the accounting records show these data. $ 16,000 470,500 Inventory, January 1 (4,000 units) Cost of 105,000 units purchased Selling price of 100,000 units sold Operating expenses 900,000 185,000 Units purchased consisted of 35,000 units at $4.21 on March 20; 65,000 units at $4.60 on July 24; and 5,000 units at $4.83 on December 12. Income taxes are 30%. Instructions (a) Prepare compårative condensed income statements for 2014 under FIFO and LIFO. (Show computations of ending inventory.) (b) - (1) Which inventory cost flow method produces the most meaningful inventory amount for the balance sheet? Why? (2) Which inventory cost flow method produces the most meaningful net income? Why? (3) Which inventory cost flow method is most likely to approximate the actual physical flow of the goods? Why? (4) How much more cash will be available under LIFO than under FIFO? Why? (5) How much of the gross profit under FIFO is illusionary in comparison with the gross profit under LIFO? Answer the following questions for management in the form of a business letter.

P6-4B The management of Weigel Inc. asks your help in determıning the compal tive effects of the FIFO and LIFO inventory cost flow methods. For 2014 the accounting records show these data. $ 16,000 470,500 Inventory, January 1 (4,000 units) Cost of 105,000 units purchased Selling price of 100,000 units sold Operating expenses 900,000 185,000 Units purchased consisted of 35,000 units at $4.21 on March 20; 65,000 units at $4.60 on July 24; and 5,000 units at $4.83 on December 12. Income taxes are 30%. Instructions (a) Prepare compårative condensed income statements for 2014 under FIFO and LIFO. (Show computations of ending inventory.) (b) - (1) Which inventory cost flow method produces the most meaningful inventory amount for the balance sheet? Why? (2) Which inventory cost flow method produces the most meaningful net income? Why? (3) Which inventory cost flow method is most likely to approximate the actual physical flow of the goods? Why? (4) How much more cash will be available under LIFO than under FIFO? Why? (5) How much of the gross profit under FIFO is illusionary in comparison with the gross profit under LIFO? Answer the following questions for management in the form of a business letter.

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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Brief Exercise 6-7 (Algo) Calculate ending inventory and cost of goods sold using weighted-average cost (LO6-3) During the year, Wright Company sells 565 remote-control airplanes for $110 each. The company has the following inventory purchase transactions for the year. Date January 1 May 5 November 3 Weighted Average Cost Beginning Inventory Purchases: Transaction Beginning inventory Purchase Purchase Calculate ending inventory and cost of goods sold for the year, assuming the company uses weighted-average cost. (Round your average cost per unit to 4 decimal places.) May 5 November 3 Total Number of Unit Units Cost 60 $63 295 66 245 71 600 60 295 245 600 Cost of Goods Available for Sale Number Average Cost Cost of Goods Number of units per unit Available for of units Sale sold $ Total Cost $3,780 19,470 17,395 $40,645 3,780 19,470 17,395 $ 40,645 Cost of Goods Sold - Weighted Average Cost Average Cost Cost of Goods per Unit Sold Ending Inventory - Weighted Average Cost Number of units…
! Required information Problem 8-5 (Algo) Various inventory costing methods [LO8-1, 8-4] [The following information applies to the questions displayed below.] A company began January with 8,000 units of its principal product. The cost of each unit is $8. Inventory transactions for the month of January are as follows: Date of Purchase. January 10 January 18 Totals Sales Date of Sale January 5 January 12 January 20 Total * Includes purchase price and cost of freight. Unit's Perpetual Average 6,000 8,000 14,000 Beginning Inventory Sale - January 5 Subtotal Average Cost Purchase - January 10 Subtotal Average Cost Sale - January 12 Subtotal Average Cost Purchase - January 18 Subtotal Average Cost Sale - January 20 Total Units 4,000 2,000 5,000 11,000 11,000 units were on hand at the end of the month. Problem 8-5 (Algo) Part 5 5. Calculate January's ending inventory and cost of goods sold for the month using Average cost, perpetual system. Note: Round average cost per unit to 4 decimal…
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Your answer is incorrect. Inventory data for Shamrock Company are reported as follows: Date Explanation Number of Units Unit Cost Total Cost June 1 Beginning inventory 370 $5 $1,850 CL Purchase 570 6 3,420 23 Purchase 470 7 Assume a sale of 610 units occurred on June 15 for a selling price of $8 and a sale of 530 units on June 27 for $9. On June 30, 270 units remain in inventory. Calculate the cost of ending inventory and cost of goods sold on June 30 under weighted average. (Round the weighted average cost per unit to 3 decimal places, eg. 5.271 and final answers to 2 decimal places, eg. 5,275.75.) Weighted Average Ending inventory $ 1,639.90 Cost of goods sold $ 6,924.80
Effects of Inventory Costing Methods Jefferson Enterprises has the following income statement data available for the year: Sales revenue $737,200 Operating expenses 243,700 Interest expense 39,500 Income tax rate 34% Jefferson uses a perpetual inventory accounting system and the average cost method. Jefferson is considering adopting the FIFO or LIFO method for costing inventory. Jefferson's accountant prepared the following data: If Average Cost Used If FIFO Used If LIFO Used Ending inventory $65,950 $78,500 $40,100 Cost of goods sold 399,050 386,500 424,900 Required: 1. Compute income before taxes, income taxes expense, and net income for each of the three inventory costing methods. (Round to the nearest dollar.) Average Cost FIFO LIFO Income before taxes $fill in the blank 1 $fill in the blank 2 $fill in the blank 3 Income tax expense $fill in the blank 4 $fill in the blank 5 $fill in the blank 6 Net income $fill in the blank 7 $fill in…
Assume General Electric Company reports the following footnote in its 10-K report. December 31 (In millions) 2016 2015 Raw materials and work in process $5,527 $5,042 Finished goods 5,152 4,806 Unbilled shipments 333 402 11,012 10,250 Less revaluation to LIFO (697) (661) $10,315 $9,589 The company reports its inventories using the LIFO inventory costing method.Assume GE has a 35% income tax rate. As of the 2016 year-end, how much has GE saved in taxes by choosing LIFO over FIFO method for costing inventory?
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Diane Company showed the following information on December 31,2014: Cost Retail Inventory, January 1 560,000 1,400,000 Sales 10,000,000 Purchases 4,960,000 10,320,000 Freight in 150,000 Markup 1,000,000 Markup cancelation 120,000 Markdown 500,000 Markdown cancelation 100,000 Estimated normal shrinkage is 2.5% of sales. Diane used the average cost retail inventory method in estimating the value of inventory. What is the estimated cost of inventory on December 31,2014? 460,000 C. 897,000 877,500 D. 990,000
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