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Scrappers Supplies tracks the number of units purchased and sold throughout each accounting period but applies its Inventory costing method at the end of each period, 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 Beginning inventory, January 1 Transactions during the year: a. Purchase on account, March 2 b. Cash sale, April 1 ($42 each) c. Purchase on account, June 30 d. Cash sale, August 1 ($42 each) TIP: Although the purchases and sales Units Unit Cost 230 $ 26 370 (380) 28 280 32 (80)

Scrappers Supplies tracks the number of units purchased and sold throughout each accounting period but applies its Inventory costing method at the end of each period, 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 Beginning inventory, January 1 Transactions during the year: a. Purchase on account, March 2 b. Cash sale, April 1 ($42 each) c. Purchase on account, June 30 d. Cash sale, August 1 ($42 each) TIP: Although the purchases and sales Units Unit Cost 230 $ 26 370 (380) 28 280 32 (80)

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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Scrappers Supplies tracks the number of units purchased and sold throughout each accounting period but applies its Inventory costing method at the end of each period, as if it uses à periodic inventory system. Assume its accounting records provided the following Information at the end of the annual accounting period, December 31. Transactions Beginning inventory, January 1 Transactions during the year: a. Purchase on account, March 2 b. Cash sale, April 1 ($42 each) c. Purchase on account, June 30 d. Cash sale, August 1 ($42 each) Units Unit Cost 230 370 (380) 280 (80) $ 26 28 32 TIP: Although the purchases and sales are listed in chronological order, Scrappers determines the cost of goods sold after all of the purchases have occurred. Required: 1. Compute the cost of goods available for sale, cost of ending Inventory, and cost of goods sold at December 31 under each of the following Inventory costing methods: (Round "Cost per Unit" to 2 decimal places.) a. Last-in, first-out. b. Weighted average cost. c. First-In, first-out d. Specific Identification, assuming that the April 1 sale was selected one-fifth from the beginning Inventory and four-fifths from the purchase of March 2. Assume that the sale of August 1 was selected from the purchase of June 30. 2. Of the four methods, which will result in the highest gross profit? Which will result in the lowest Income taxes? Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 1C Req 1D Req 2A Req 2B a. Compute the cost of goods available for sale, cost of ending inventory, and cost of goods sold at December 31 using the LIFO method. (Round "Cost per Unit" anwers to 2 decimal places.) LIFO (Periodic) Beginning Inventory Purchases March 2 June 30 Total Purchases Goods Available for Sale Units Cost per Total Unit $ 0 0
Transcribed Image Text:Scrappers Supplies tracks the number of units purchased and sold throughout each accounting period but applies its Inventory costing method at the end of each period, as if it uses à periodic inventory system. Assume its accounting records provided the following Information at the end of the annual accounting period, December 31. Transactions Beginning inventory, January 1 Transactions during the year: a. Purchase on account, March 2 b. Cash sale, April 1 ($42 each) c. Purchase on account, June 30 d. Cash sale, August 1 ($42 each) Units Unit Cost 230 370 (380) 280 (80) $ 26 28 32 TIP: Although the purchases and sales are listed in chronological order, Scrappers determines the cost of goods sold after all of the purchases have occurred. Required: 1. Compute the cost of goods available for sale, cost of ending Inventory, and cost of goods sold at December 31 under each of the following Inventory costing methods: (Round "Cost per Unit" to 2 decimal places.) a. Last-in, first-out. b. Weighted average cost. c. First-In, first-out d. Specific Identification, assuming that the April 1 sale was selected one-fifth from the beginning Inventory and four-fifths from the purchase of March 2. Assume that the sale of August 1 was selected from the purchase of June 30. 2. Of the four methods, which will result in the highest gross profit? Which will result in the lowest Income taxes? Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 1C Req 1D Req 2A Req 2B a. Compute the cost of goods available for sale, cost of ending inventory, and cost of goods sold at December 31 using the LIFO method. (Round "Cost per Unit" anwers to 2 decimal places.) LIFO (Periodic) Beginning Inventory Purchases March 2 June 30 Total Purchases Goods Available for Sale Units Cost per Total Unit $ 0 0
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