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The management of Swifty Inc. Is reevaluating the appropriateness of using its present Inventory cost flow method, which is average- cost. The company requests your help in determining the results of operations for 2022 If elther the FIFO or the LIFO method had been used. For 2022, the accounting records show these data: Inventorles Beginning (8,000 units) Ending (13,000 units) Purchases were made quarterly as follows. Quarter Units Unit Cost $4.20 1 2 3 50,000 40,000 $32,000 40,000 60,000 4.35 4.50 4.70 Total net sales (185,000 units) Total cost of goods purchased (190,000 units) Total Cost $210,000 174,000 180,000 Purchases and Sales 282,000 $1,137,750 846,000

The management of Swifty Inc. Is reevaluating the appropriateness of using its present Inventory cost flow method, which is average- cost. The company requests your help in determining the results of operations for 2022 If elther the FIFO or the LIFO method had been used. For 2022, the accounting records show these data: Inventorles Beginning (8,000 units) Ending (13,000 units) Purchases were made quarterly as follows. Quarter Units Unit Cost $4.20 1 2 3 50,000 40,000 $32,000 40,000 60,000 4.35 4.50 4.70 Total net sales (185,000 units) Total cost of goods purchased (190,000 units) Total Cost $210,000 174,000 180,000 Purchases and Sales 282,000 $1,137,750 846,000

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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(b) Your Answer Correct Answer Answer the following questions for management. (1) (2) (5) Which cost flow method (FIFO or LIFO) produces the more meaningful Inventory amount for the balance sheet? Which cost flow method (FIFO or LIFO) produces the more meaningful net Income? Which cost flow method (FIFO or LIFO) is more likely to approximate the actual physical flow of goods? How much more cash will be available for management under LIFO than under FIFO? Will gross profit under the average-cost method be higher or lower than FIFO? Will gross profit under the average-cost method be higher or lower than LIFO?
Transcribed Image Text:(b) Your Answer Correct Answer Answer the following questions for management. (1) (2) (5) Which cost flow method (FIFO or LIFO) produces the more meaningful Inventory amount for the balance sheet? Which cost flow method (FIFO or LIFO) produces the more meaningful net Income? Which cost flow method (FIFO or LIFO) is more likely to approximate the actual physical flow of goods? How much more cash will be available for management under LIFO than under FIFO? Will gross profit under the average-cost method be higher or lower than FIFO? Will gross profit under the average-cost method be higher or lower than LIFO?
The management of Swifty Inc. Is reevaluating the appropriateness of using its present Inventory cost flow method, which is average- cost. The company requests your help in determining the results of operations for 2022 If elther the FIFO or the LIFO method had been used. For 2022, the accounting records show these data: Inventorles Beginning (8,000 units) $32,000 Ending (13,000 units) Purchases were made quarterly as follows. Quarter Units 1 50,000 2 (a) 3 40,000 40,000 60,000 190,000 Unit Cost $4.20 4.35 4.50 4.70 Purchases and Sales Total net sales (185,000 units) Total cost of goods purchased (190,000 units) Total Cost $210,000 174,000 180,000 282,000 $846,000 Operating expenses were $130,000, and the company's Income tax rate is 40%. $1,137,750 846,000
Transcribed Image Text:The management of Swifty Inc. Is reevaluating the appropriateness of using its present Inventory cost flow method, which is average- cost. The company requests your help in determining the results of operations for 2022 If elther the FIFO or the LIFO method had been used. For 2022, the accounting records show these data: Inventorles Beginning (8,000 units) $32,000 Ending (13,000 units) Purchases were made quarterly as follows. Quarter Units 1 50,000 2 (a) 3 40,000 40,000 60,000 190,000 Unit Cost $4.20 4.35 4.50 4.70 Purchases and Sales Total net sales (185,000 units) Total cost of goods purchased (190,000 units) Total Cost $210,000 174,000 180,000 282,000 $846,000 Operating expenses were $130,000, and the company's Income tax rate is 40%. $1,137,750 846,000
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