[The following information applies to the questions displayed below.] Income is to be evaluated under four different situations as follows: a. Prices are rising: (1) Situation A: FIFO is used. (2) Situation B: LIFO is used. b. Prices are falling: (1) Situation C: FIFO is used. (2) Situation D: LIFO is used. The basic data common to all four situations are sales, 500 units for $15,000; beginning inventory, 300 units; purchases, 400 units; ending inventory, 200 units; and operating expenses, $4,000. The income tax rate is 30%. P7-5 Part 1 Required: 1. Complete the following tabulation for each situation. In Situations A and B (prices rising), assume the following: beginning inventory, 300 units at $11 = $3,300; purchases, 400 units at $12 = $4,800. In Situations C and D (prices falling), assume the opposite; that is, beginning inventory, 300 units at $12 = $3,600; purchases, 400 units at $11= $4,400. Use periodic inventory procedures. Sales revenue Cost of goods sold: Beginning inventory Purchases Goods available for sale Ending inventory Cost of goods sold Gross profit Expenses Pretax income Income tax expense Net income Situation A FIFO $ PRICES RISING Situation B LIFO 15,000 $ 15,000 $ $ 3,300 4,800 8,100 2,400 5,700 9,300 4,000 5,300 1,590 3,710 4,000 PRICES FALLING Situation C FIFO Situation D LIFO 15,000 $ 4,000 15,000 4,000
[The following information applies to the questions displayed below.] Income is to be evaluated under four different situations as follows: a. Prices are rising: (1) Situation A: FIFO is used. (2) Situation B: LIFO is used. b. Prices are falling: (1) Situation C: FIFO is used. (2) Situation D: LIFO is used. The basic data common to all four situations are sales, 500 units for $15,000; beginning inventory, 300 units; purchases, 400 units; ending inventory, 200 units; and operating expenses, $4,000. The income tax rate is 30%. P7-5 Part 1 Required: 1. Complete the following tabulation for each situation. In Situations A and B (prices rising), assume the following: beginning inventory, 300 units at $11 = $3,300; purchases, 400 units at $12 = $4,800. In Situations C and D (prices falling), assume the opposite; that is, beginning inventory, 300 units at $12 = $3,600; purchases, 400 units at $11= $4,400. Use periodic inventory procedures. Sales revenue Cost of goods sold: Beginning inventory Purchases Goods available for sale Ending inventory Cost of goods sold Gross profit Expenses Pretax income Income tax expense Net income Situation A FIFO $ PRICES RISING Situation B LIFO 15,000 $ 15,000 $ $ 3,300 4,800 8,100 2,400 5,700 9,300 4,000 5,300 1,590 3,710 4,000 PRICES FALLING Situation C FIFO Situation D LIFO 15,000 $ 4,000 15,000 4,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![P7-5 (Static) Evaluating the LIFO and FIFO Choice When Costs Are Rising and Falling LO7-2, 7-3
[The following information applies to the questions displayed below.]
Income is to be evaluated under four different situations as follows:
a. Prices are rising:
(1) Situation A: FIFO is used.
(2) Situation B: LIFO is used.
b. Prices are falling:
(1) Situation C: FIFO is used.
(2) Situation D: LIFO is used.
The basic data common to all four situations are sales, 500 units for $15,000; beginning inventory, 300 units; purchases,
400 units; ending inventory, 200 units; and operating expenses, $4,000. The income tax rate is 30%.
P7-5 Part 1
Required:
1. Complete the following tabulation for each situation. In Situations A and B (prices rising), assume the following: beginning inventory,
300 units at $11 = $3,300; purchases, 400 units at $12 = $4,800. In Situations C and D (prices falling), assume the opposite; that is,
beginning inventory, 300 units at $12 = $3,600; purchases, 400 units at $11= $4,400. Use periodic inventory procedures.
Sales revenue
Cost of goods sold:
Beginning inventory
Purchases
Goods available for sale
Ending inventory
Cost of goods sold
Gross profit
Expenses
Pretax income
Income tax expense
Net income
Situation A
FIFO
$
$
PRICES RISING
Situation B
LIFO
15,000 $ 15,000 $ 15,000 $
3,300
4,800
8,100
2,400
5,700
9,300
4,000
5,300
1,590
3,710
PRICES FALLING
Situation C
FIFO
4,000
4,000
Situation D
LIFO
15,000
4,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F58f64e99-b3fb-491d-a9f5-7a66a1bd819c%2Feac77a95-6f56-4128-806d-b9fe84adcb04%2Fdrmd2vo_processed.png&w=3840&q=75)
Transcribed Image Text:P7-5 (Static) Evaluating the LIFO and FIFO Choice When Costs Are Rising and Falling LO7-2, 7-3
[The following information applies to the questions displayed below.]
Income is to be evaluated under four different situations as follows:
a. Prices are rising:
(1) Situation A: FIFO is used.
(2) Situation B: LIFO is used.
b. Prices are falling:
(1) Situation C: FIFO is used.
(2) Situation D: LIFO is used.
The basic data common to all four situations are sales, 500 units for $15,000; beginning inventory, 300 units; purchases,
400 units; ending inventory, 200 units; and operating expenses, $4,000. The income tax rate is 30%.
P7-5 Part 1
Required:
1. Complete the following tabulation for each situation. In Situations A and B (prices rising), assume the following: beginning inventory,
300 units at $11 = $3,300; purchases, 400 units at $12 = $4,800. In Situations C and D (prices falling), assume the opposite; that is,
beginning inventory, 300 units at $12 = $3,600; purchases, 400 units at $11= $4,400. Use periodic inventory procedures.
Sales revenue
Cost of goods sold:
Beginning inventory
Purchases
Goods available for sale
Ending inventory
Cost of goods sold
Gross profit
Expenses
Pretax income
Income tax expense
Net income
Situation A
FIFO
$
$
PRICES RISING
Situation B
LIFO
15,000 $ 15,000 $ 15,000 $
3,300
4,800
8,100
2,400
5,700
9,300
4,000
5,300
1,590
3,710
PRICES FALLING
Situation C
FIFO
4,000
4,000
Situation D
LIFO
15,000
4,000
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