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Problem: Module 2 Textbook Problem 11 Learning Objective: 2-7 Show how different inventory cost flow methods (specific identification, FIFO, LIFO, and weighted average) affect financial statements The following information pertains to the inventory of Parvin Company: Jan. 1 Beginning inventory Purchased Apr. 1 Oct. 1 Purchased 400 units 2,600 units 1,100 units @ $20 @ $25 @$26 During the year, Parvin sold 3,485 units of inventory at $41 per unit and incurred $16.500 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 30 percent income tax rate. Parvin started the period with cash of $137,000, inventory of $8,000, common stock of $122,000, and retained earnings of $23,000. Required a. Prepare income statements using FIFO and LIFO. b. Determine the amount of income tax that Parvin would pay using each cost flow method. c. Determine the cash flow from operating activities under FIFO and LIFO

Problem: Module 2 Textbook Problem 11 Learning Objective: 2-7 Show how different inventory cost flow methods (specific identification, FIFO, LIFO, and weighted average) affect financial statements The following information pertains to the inventory of Parvin Company: Jan. 1 Beginning inventory Purchased Apr. 1 Oct. 1 Purchased 400 units 2,600 units 1,100 units @ $20 @ $25 @$26 During the year, Parvin sold 3,485 units of inventory at $41 per unit and incurred $16.500 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 30 percent income tax rate. Parvin started the period with cash of $137,000, inventory of $8,000, common stock of $122,000, and retained earnings of $23,000. Required a. Prepare income statements using FIFO and LIFO. b. Determine the amount of income tax that Parvin would pay using each cost flow method. c. Determine the cash flow from operating activities under FIFO and LIFO

FINANCIAL ACCOUNTING
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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Problem: Module 2 Textbook Problem 11 Learning Objective: 2-7 Show how different inventory cost flow methods (specific identification, FIFO, LIFO, and weighted average) affect financial statements The following information pertains to the inventory of Parvin Company: Jan. 1 Apr. 1 Oct. 1 Beginning inventory Purchased Purchased 400 units @ $20 2,600 units @ $25 1,100 units @ $26 During the year, Parvin sold 3,485 units of inventory at $41 per unit and incurred $16,500 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 30 percent income tax rate. Parvin started the period with cash of $137,000, inventory of $8,000, common stock of $122,000, and retained earnings of $23,000. Required a. Prepare income statements using FIFO and LIFO. b. Determine the amount of income tax that Parvin would pay using each cost flow method. c. Determine the cash flow from operating activities under FIFO and LIFO.
Transcribed Image Text:Problem: Module 2 Textbook Problem 11 Learning Objective: 2-7 Show how different inventory cost flow methods (specific identification, FIFO, LIFO, and weighted average) affect financial statements The following information pertains to the inventory of Parvin Company: Jan. 1 Apr. 1 Oct. 1 Beginning inventory Purchased Purchased 400 units @ $20 2,600 units @ $25 1,100 units @ $26 During the year, Parvin sold 3,485 units of inventory at $41 per unit and incurred $16,500 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 30 percent income tax rate. Parvin started the period with cash of $137,000, inventory of $8,000, common stock of $122,000, and retained earnings of $23,000. Required a. Prepare income statements using FIFO and LIFO. b. Determine the amount of income tax that Parvin would pay using each cost flow method. c. Determine the cash flow from operating activities under FIFO and LIFO.
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