**Educational Exercise: Inventory Costing Methods****Scenario:**Watson Print Supplies, Inc., specializes in laser printers and supplies. At the beginning of the year, Watson had 90 containers of ink with the following costs: - Average Cost: $8.50 each- FIFO Cost: $8.90 each- LIFO Cost: $7.80 eachThroughout the year, Watson purchased 720 containers of ink at $10.30 each and sold 580 units for $19.75 each. The company incurred operating expenses totaling $4,050.**Objective:**Prepare Watson's income statement for the year ending December 31 using three inventory costing methods: Average Cost, FIFO (First-In, First-Out), and LIFO (Last-In, First-Out).**Instructions:**Complete the income statement by selecting the proper headings and labels, and calculating for each inventory method. Round unit costs to the nearest cent and other numbers to the nearest whole dollar.**Income Statement Format:**1. **Watson Print Supplies, Inc.**2. **Income Statement**3. **Year Ended December 31**| Description | Average Cost | FIFO | LIFO ||----------------------|--------------|---------|---------|| Sales revenue | _____ | _____ | _____ || Cost of goods sold | _____ | _____ | _____ || Gross profit | _____ | _____ | _____ || Operating expenses | $4,050 | $4,050 | $4,050 || Net income | _____ | _____ | _____ |*Students are required to fill in the blank values using the provided costs and methods.*

Introduction: - FIFO means First-in-first-out It is one of the inventory valuation method. As per this method First comes into inventory first goes out. As per LIFO method, records the most recently produced items as sold first. LIFO means. last in first out. Ending inventory will be earliest purchases.Explanations:- Waston print supplies Inc, Income statement Year Ended Dec 31 Average cost FIFO LIFO Sales revenue(580 x 19.75) 11455 11455 11455 Cost of goods sold 5858 5848 5974 [(90 x 8.5) + (720 x 10.3)]/810 x 580 (90 x 8.9) + (490 x 10.3) (580 x 10.3) Gross profit(sales - cost of goods sold) 5597 5607 5481 Operating expenses 4,050 4,050 4,050 Net Income (gross profit - operating expense) 1,547 1,557 1,431

Business

Accounting

Watson Print Supplies, Inc., sells laser printers and supplies. Assume Watson started the year with 90 containers of ink (average cost of $8.50 each, FIFO cost of $8.90 each, LIFO cost each). During the year, the company purchased 720 containers of ink at $10.30 and sold 580 units for $19.75 each. Watson paid operating expenses throughout the year, a total of $4,0 gnore income taxes for this exercise. Prepare Watson's income statement for the current year ended December 31 using the average-cost, FIFO, and LIFO inventory costing methods. Include a complete statement heading Complete the income statement by selecting the appropriate heading and income statement labels, and then calculating the amounts for each of the three required inventory methods. unit costs to the nearest cent. Round all other calculations to the nearest whole dollar.) Sales revenue Cost of goods sold Gross profit Operating expenses ▼ Watson Print Supplies, Inc. Income Statement Year Ended December 31 Average Cost FFIO LFIO

Watson Print Supplies, Inc., sells laser printers and supplies. Assume Watson started the year with 90 containers of ink (average cost of $8.50 each, FIFO cost of $8.90 each, LIFO cost each). During the year, the company purchased 720 containers of ink at $10.30 and sold 580 units for $19.75 each. Watson paid operating expenses throughout the year, a total of $4,0 gnore income taxes for this exercise. Prepare Watson's income statement for the current year ended December 31 using the average-cost, FIFO, and LIFO inventory costing methods. Include a complete statement heading Complete the income statement by selecting the appropriate heading and income statement labels, and then calculating the amounts for each of the three required inventory methods. unit costs to the nearest cent. Round all other calculations to the nearest whole dollar.) Sales revenue Cost of goods sold Gross profit Operating expenses ▼ Watson Print Supplies, Inc. Income Statement Year Ended December 31 Average Cost FFIO LFIO

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Question

**Educational Exercise: Inventory Costing Methods**

**Scenario:**
Watson Print Supplies, Inc., specializes in laser printers and supplies. At the beginning of the year, Watson had 90 containers of ink with the following costs:
- Average Cost: $8.50 each
- FIFO Cost: $8.90 each
- LIFO Cost: $7.80 each

Throughout the year, Watson purchased 720 containers of ink at $10.30 each and sold 580 units for $19.75 each. The company incurred operating expenses totaling $4,050.

**Objective:**
Prepare Watson's income statement for the year ending December 31 using three inventory costing methods: Average Cost, FIFO (First-In, First-Out), and LIFO (Last-In, First-Out).

**Instructions:**
Complete the income statement by selecting the proper headings and labels, and calculating for each inventory method. Round unit costs to the nearest cent and other numbers to the nearest whole dollar.

**Income Statement Format:**

1. **Watson Print Supplies, Inc.**
2. **Income Statement**
3. **Year Ended December 31**

| Description | Average Cost | FIFO | LIFO |
|----------------------|--------------|---------|---------|
| Sales revenue | _____ | _____ | _____ |
| Cost of goods sold | _____ | _____ | _____ |
| Gross profit | _____ | _____ | _____ |
| Operating expenses | $4,050 | $4,050 | $4,050 |
| Net income | _____ | _____ | _____ |

*Students are required to fill in the blank values using the provided costs and methods.*

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