Periodic System-Computing Cost of Sales and Gross Profit under FIFO and LIFO The owner of Valley Inc. wants to maximize after-tax cash flows and is considering switching from FIFO. The following data are available for its first quarter of the year. Sales for the first quarter totaled 198 units, and a physical inventory taken on March 31 showed 90 units available in inventory. Valley uses the periodic inventory system. Date January 1 (beginning inventory) Purchases COGAS Less: Ending Inventory COGS a. Compute cost of goods sold and ending inventory for the first quarter of the year using (1) FIFO and (2) LIFO. Note: Do not use any negative signs with your answers. $ FIFO (periodic) LIFO (periodic) $ OS 0 0$ Sales Less: Cost of goods sold Gross profit S S January 15 February 12 March 19 b. Which of the following inventory methods would we recommend that Valley use to produce the greatest after-tax cash flows: FIFO or LIFO? S c. Prepare a schedule showing the gross profit and gross profit percentage for each method in part a assuming all units sold during the quarter were at a price of $300 each. • Note: Do not use any negative signs with your answers. $ Units Unit Cost $180 54 72 90 72 FIFO(periodic) LIFO(periodic) 0 0-5 S 05 0 05 + - 0 0 -0 Method Numerator Denominator Gross Profit Percentage FIFO LIFO 0- 0 - 205 215 230 0 0 0
Periodic System-Computing Cost of Sales and Gross Profit under FIFO and LIFO The owner of Valley Inc. wants to maximize after-tax cash flows and is considering switching from FIFO. The following data are available for its first quarter of the year. Sales for the first quarter totaled 198 units, and a physical inventory taken on March 31 showed 90 units available in inventory. Valley uses the periodic inventory system. Date January 1 (beginning inventory) Purchases COGAS Less: Ending Inventory COGS a. Compute cost of goods sold and ending inventory for the first quarter of the year using (1) FIFO and (2) LIFO. Note: Do not use any negative signs with your answers. $ FIFO (periodic) LIFO (periodic) $ OS 0 0$ Sales Less: Cost of goods sold Gross profit S S January 15 February 12 March 19 b. Which of the following inventory methods would we recommend that Valley use to produce the greatest after-tax cash flows: FIFO or LIFO? S c. Prepare a schedule showing the gross profit and gross profit percentage for each method in part a assuming all units sold during the quarter were at a price of $300 each. • Note: Do not use any negative signs with your answers. $ Units Unit Cost $180 54 72 90 72 FIFO(periodic) LIFO(periodic) 0 0-5 S 05 0 05 + - 0 0 -0 Method Numerator Denominator Gross Profit Percentage FIFO LIFO 0- 0 - 205 215 230 0 0 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Periodic System-Computing Cost of Sales and Gross Profit under FIFO and LIFO
The owner of Valley Inc. wants to maximize after-tax cash flows and is considering switching from FIFO. The following data are available for its first quarter of the year. Sales for the first quarter totaled 198 units, and a physical inventory taken on
March 31 showed 90 units available in inventory. Valley uses the periodic inventory system.
Date
January 1 (beginning inventory)
Purchases:
COGAS
Less: Ending Inventory
COGS
a. Compute cost of goods sold and ending inventory for the first quarter of the year using (1) FIFO and (2) LIFO.
• Note: Do not use any negative signs with your answers.
January 15
February 12
March 19
Sales
Less: Cost of goods sold
Gross profit
FIFO
LIFO
FIFO (periodic) LIFO (periodic)
$
0 $
$
$
0 $
b. Which of the following inventory methods would we recommend that Valley use to produce the greatest after-tax cash flows: FIFO or LIFO?
$
c. Prepare a schedule showing the gross profit and gross profit percentage for each method in part a assuming all units sold during the quarter were at a price of $300 each.
. Note: Do not use any negative signs with your answers.
Units Unit Cost
$180
Method Numerator + Denominator
0 + $
0 $
54
72
90
72
0 $
0
0 $
FIFO (periodic) LIFO(periodic)
$
=
0
0
0
0 =
205
215
230
0
0
0
Gross Profit Percentage
%
%
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