### Inventory Analysis for Parvin Company: Year 2#### Background Information:The following data pertains to the inventory transactions of Parvin Company for Year 2:- **Beginning Inventory (January 1)**: - Quantity: 300 units - Unit Cost: $37- **Purchases:** - **April 1**: - Quantity: 2,900 units - Unit Cost: $42 - **October 1**: - Quantity: 500 units - Unit Cost: $45During Year 2, Parvin sold a total of 3,500 units of inventory at a unit price of $80 and incurred an operating expense of $46,000. The company currently utilizes the FIFO (First-In, First-Out) method but is considering switching to the LIFO (Last-In, First-Out) method. It should be noted that all transactions were carried out in cash. For the purposes of this analysis, assume a 30% income tax rate.Financial Foundations:- Initial Cash Balance: $84,000- Initial Inventory Balance: $11,100- Common Stock: $59,000- Retained Earnings: $36,100#### Required Actions:1. **Journal Entries:** - Record the transactions in the general journal using: - FIFO method - LIFO method2. **T-Accounts:** - Post the transactions to the respective T-accounts using both FIFO and LIFO methods.#### Instructions:**Step-by-Step Process for Recording and Posting Entries**1. **Journal Entries**: - Create journal entries for each transaction using FIFO method. - Repeat the process using the LIFO method.2. **T-Accounts**: - Post the recorded journal entries into the relevant T-accounts for both FIFO and LIFO.**Graphical Representation and Tables**:A tabulation of entries might resemble:| **T-Accounts** | **Cash** | **Merchandise Inventory** ||------------------------------|----------------|---------------------------|| **Beginning Balance** | | 37 x 300 || | | 42 x 2,900 || | | 45 x 500 || **April 1 Purchase** | | || **October 1 Purchase** | | |

First in First OutAccording to the FIFO system, the first inventory items to be bought or created…

The following information pertains to the inventory of Parvin Company during Year 2. Beginning Inventory Purchased Purchased 300 units @ $37 2,900 units @ $42 500 units @ $45 January 1 April 1 October 1 During Year 2, Parvin sold 3,500 units of inventory at $80 per unit and incurred $46,000 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 $84,000, inventory of $11,100, common stock of $59,000, and retained earnings of $36,100. Required a. Record the above transactions in general journal form and post to T-accounts using (1) FIFO and (2) LIFO. Use a separate set of journal entries and T-accounts for each method.

The following information pertains to the inventory of Parvin Company during Year 2. Beginning Inventory Purchased Purchased 300 units @ $37 2,900 units @ $42 500 units @ $45 January 1 April 1 October 1 During Year 2, Parvin sold 3,500 units of inventory at $80 per unit and incurred $46,000 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 $84,000, inventory of $11,100, common stock of $59,000, and retained earnings of $36,100. Required a. Record the above transactions in general journal form and post to T-accounts using (1) FIFO and (2) LIFO. Use a separate set of journal entries and T-accounts for each method.

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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