### Required Information**[The following information applies to the questions displayed below.]**The following information pertains to the inventory of Parvin Company during Year 2.#### Inventory Details:- **January 1:** Beginning Inventory - 700 units @ $31- **April 1:** Purchased - 2,600 units @ $36- **October 1:** Purchased - 900 units @ $39During Year 2, Parvin sold 3,900 units of inventory at $85 per unit and incurred $44,500 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 40 percent income tax rate. Parvin started the period with:- Cash: $81,000- Inventory: $21,700- Common stock: $56,000- Retained earnings: $46,700#### Instruction:d. Determine the cash flow from operating activities under FIFO and LIFO. **(Amounts to be deducted should be indicated with minus sign.)** ### Cash Flow from Operating Activities: FIFO and LIFO**Objective:** Determine the cash flow from operating activities under FIFO and LIFO.**Company**: Parvin Company**Cash Flows from Operating Activities:**| Cash flows from operating activities | FIFO | LIFO ||-----------------------------------------------|------------|------------|| Cash inflow from customers | \$331,500 | \$331,500 | ✔️ || Cash outflow for inventory | \$(138,700) | \$(141,100) | ❌ || Cash outflow for operating expenses | \$(44,500) | \$(44,500) | ✔️ || Cash outflow for income tax expense | \$(59,320) | \$(58,360) | ✔️ || **Net cash flow from operating activities** | **\$88,980** | **\$87,540** |**Note:**- The red text denotes that no response was expected in a cell or a formula-based calculation is incorrect; no points were deducted.### Explanation of Key Aspects:**Cash Inflow from Customers:**- The cash received from customers is the same under both FIFO and LIFO accounting methods (\$331,500).**Cash Outflow for Inventory:**- Under FIFO, the cash outflow for inventory is \$138,700.- Under LIFO, the cash outflow for inventory is \$141,100. It is slightly higher compared to FIFO.**Cash Outflow for Operating Expenses:**- Both methods incur the same cash outflow for operating expenses, which is \$44,500.**Cash Outflow for Income Tax Expense:**- Under FIFO, the cash outflow for income tax expense is \$59,320.- Under LIFO, the cash outflow for income tax expense is \$58,360.**Net Cash Flow from Operating Activities:**- Under FIFO, the net cash flow from operating activities is \$88,980.- Under LIFO, the net cash flow from operating activities is \$87,540.### Additional Information:- The green checkmarks (✔️) indicate correct entries.- The red cross (❌) indicates that a formula-based calculation was incorrect or no response was expected for that cell.This detailed breakdown helps in understanding the differences and similarities in cash flows between FIFO and LIFO accounting methods.

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Description: ### Required Information**[The following information applies to the questions displayed below.]**The following information pertains to the inventory of Parvin Company during Year 2.#### Inventory Details:- **January 1:** Beginning Inventory - 700 u

Under FIFO method the oldest products in inventory have been sold first.Under LIFO method the newest…

Business

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The following information pertains to the inventory of Parvin Company during Year 2. January 1 April 1 700 units @ $31 2,600 units @ $36 900 units @ $39 October 1 Beginning Inventory Purchased Purchased During Year 2, Parvin sold 3,900 units of inventory at $85 per unit and incurred $44,500 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 40 percent income tax rate. Parvin started the period with cash of $81,000, inventory of $21,700, common stock of $56,000, and retained earnings of $46,700. d. Determine the cash flow from operating activities under FIFO and LIFO. (Amounts to be deducted should be indicated with minus sign.)

The following information pertains to the inventory of Parvin Company during Year 2. January 1 April 1 700 units @ $31 2,600 units @ $36 900 units @ $39 October 1 Beginning Inventory Purchased Purchased During Year 2, Parvin sold 3,900 units of inventory at $85 per unit and incurred $44,500 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 40 percent income tax rate. Parvin started the period with cash of $81,000, inventory of $21,700, common stock of $56,000, and retained earnings of $46,700. d. Determine the cash flow from operating activities under FIFO and LIFO. (Amounts to be deducted should be indicated with minus sign.)

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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