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 Units 190 Unit Cost Beginning inventory, January 1 Transactions during the year: a. Purchase on account, March 2 b. Cash sale, April 1 ($49 each) c. Purchase on account, June 30 d. Cash sale, August 1 ($49 each) $33 295 (340) 240 (95) 35 39 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?
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 Units 190 Unit Cost Beginning inventory, January 1 Transactions during the year: a. Purchase on account, March 2 b. Cash sale, April 1 ($49 each) c. Purchase on account, June 30 d. Cash sale, August 1 ($49 each) $33 295 (340) 240 (95) 35 39 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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 a periodic inventory system. Assume its accounting records provided the
following information at the end of the annual accounting period, December 31.
Unit Cost
$33
Transactions
Units
Beginning inventory, January 1
Transactions during the year:
a. Purchase on account, March 2
b. Cash sale, April 1 ($49 each)
c. Purchase on account, June 30
d. Cash sale, August 1 ($49 each)
190
295
(340)
240
35
39
(95)
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 3O.
2. Of the four methods, which will result in the highest gross profit? Which will result in the lowest income taxes?
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Req 1A
Req 1B
Req 10
Reg 1D
Req 2A
Req 2B
b. Compute the cost of goods available for sale, cost of ending inventory, and cost of goods sold at December 31 using the
Weighted average method. (Round "Cost per Unit" anwers to 2 decimal places.)
Weighted Average Cost (Periodic)
Cost per
Unit
Units
Total
Beginning Inventory
$
Purchases
March 2
June 30
Total Purchases
Goods Available for Sale
Cost of Goods Sold
$
Ending Inventory
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