Cost flow assumptions: Cost flow assumptions can be referred to as the method which determines the flow of costs when an inventory is sold. Instead of keeping a track record for cost of each product sold, a company adopts these methods, and identifies which units were sold. It differs from specific identification method because the actual physical movement of goods may be unrelated to the flow of costs. To determine: Gross profit and ending inventory under First-in-first out (FIFO) method.

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Answer 1

Question

Chapter 6, Problem 6.1BPE

(a)

To determine

Cost flow assumptions:

Cost flow assumptions can be referred to as the method which determines the flow of costs when an inventory is sold. Instead of keeping a track record for cost of each product sold, a company adopts these methods, and identifies which units were sold. It differs from specific identification method because the actual physical movement of goods may be unrelated to the flow of costs.

To determine: Gross profit and ending inventory under First-in-first out (FIFO) method.

(b)

To determine

Gross profit and ending inventory under Last-in-first out (LIFO) method.

(c)

To determine

Gross profit and ending inventory under weighted average inventory method.

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1. I want to know how to solve these 2 questions and what the answers are 3. Field & Co. expects its EBIT to be $125,000 every year forever. The firm can borrow at 7%. The company currently has no debt, and its cost of equity is 12%. If the tax rate is 24%, what is the value of the firm? What will the value be if the company borrows $205,000 and uses the proceeds to purchase shares? 2. Firms HD and LD each have $30m in invested capital, $8m of EBIT, and a tax rate of 25%. Firm HD has a D/E ratio of 50% with an interest rate of 8% on their debt. Firm LD has a debt-to-capital ratio of 30%, however, pays 9% interest on its debt. Calculate the following: a. Return on invested capital for firm LDb. Return on equity for each firmc. If HD’s CFO is thinking of lowering the D/E from 50% to 40%, which will lower their interest rate further from 8% to 7%, calculate the new ROE for firm HD.

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Answer 2

Question

Chapter 6, Problem 6.1BPE

(a)

To determine

Cost flow assumptions:

Cost flow assumptions can be referred to as the method which determines the flow of costs when an inventory is sold. Instead of keeping a track record for cost of each product sold, a company adopts these methods, and identifies which units were sold. It differs from specific identification method because the actual physical movement of goods may be unrelated to the flow of costs.

To determine: Gross profit and ending inventory under First-in-first out (FIFO) method.

(b)

To determine

Gross profit and ending inventory under Last-in-first out (LIFO) method.

(c)

To determine

Gross profit and ending inventory under weighted average inventory method.

Expert Solution & Answer

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Answer 3

Question

Chapter 6, Problem 6.1BPE

(a)

To determine

Cost flow assumptions:

Cost flow assumptions can be referred to as the method which determines the flow of costs when an inventory is sold. Instead of keeping a track record for cost of each product sold, a company adopts these methods, and identifies which units were sold. It differs from specific identification method because the actual physical movement of goods may be unrelated to the flow of costs.

To determine: Gross profit and ending inventory under First-in-first out (FIFO) method.

(b)

To determine

Gross profit and ending inventory under Last-in-first out (LIFO) method.

(c)

To determine

Gross profit and ending inventory under weighted average inventory method.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 6, Problem 6.1BPE

(a)

To determine

Cost flow assumptions:

Cost flow assumptions can be referred to as the method which determines the flow of costs when an inventory is sold. Instead of keeping a track record for cost of each product sold, a company adopts these methods, and identifies which units were sold. It differs from specific identification method because the actual physical movement of goods may be unrelated to the flow of costs.

To determine: Gross profit and ending inventory under First-in-first out (FIFO) method.

(b)

To determine

Gross profit and ending inventory under Last-in-first out (LIFO) method.

(c)

To determine

Gross profit and ending inventory under weighted average inventory method.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 5

Chapter 6, Problem 6.1BPE

(a)

To determine

Cost flow assumptions:

Cost flow assumptions can be referred to as the method which determines the flow of costs when an inventory is sold. Instead of keeping a track record for cost of each product sold, a company adopts these methods, and identifies which units were sold. It differs from specific identification method because the actual physical movement of goods may be unrelated to the flow of costs.

To determine: Gross profit and ending inventory under First-in-first out (FIFO) method.

(b)

To determine

Gross profit and ending inventory under Last-in-first out (LIFO) method.

(c)

To determine

Gross profit and ending inventory under weighted average inventory method.

Answer 6

Chapter 6, Problem 6.1BPE

(a)

To determine

Cost flow assumptions:

Cost flow assumptions can be referred to as the method which determines the flow of costs when an inventory is sold. Instead of keeping a track record for cost of each product sold, a company adopts these methods, and identifies which units were sold. It differs from specific identification method because the actual physical movement of goods may be unrelated to the flow of costs.

To determine: Gross profit and ending inventory under First-in-first out (FIFO) method.

Answer 7

Chapter 6, Problem 6.1BPE

(a)

To determine

Cost flow assumptions:

Cost flow assumptions can be referred to as the method which determines the flow of costs when an inventory is sold. Instead of keeping a track record for cost of each product sold, a company adopts these methods, and identifies which units were sold. It differs from specific identification method because the actual physical movement of goods may be unrelated to the flow of costs.

To determine: Gross profit and ending inventory under First-in-first out (FIFO) method.

Answer 8

(b)

To determine

Gross profit and ending inventory under Last-in-first out (LIFO) method.

Answer 9

(b)

To determine

Gross profit and ending inventory under Last-in-first out (LIFO) method.

Answer 10

(c)

To determine

Gross profit and ending inventory under weighted average inventory method.

Answer 11

(c)

To determine

Gross profit and ending inventory under weighted average inventory method.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 6 - Before inventory purchases are recorded, the...Ch. 6 - Why is it important to periodically take a...Ch. 6 - Do the terms FIFO, LIFO, and weighted average...Ch. 6 - If inventory is being valued at cost and the price...Ch. 6 - Which of the three methods of inventory...Ch. 6 - If inventory is being valued at cost and the price...Ch. 6 - Using the following data, how should the inventory...Ch. 6 - Prob. 8DQ Ch. 6 - Hutch Co. sold merchandise to Bibbins Company on...Ch. 6 - A manufacturer shipped merchandise to a retailer...

Solution Summary: The author explains the cost flow assumptions, which determine the flow of costs when an inventory is sold.

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Gross profit and ending inventory under Last-in-first out (LIFO) method.

Gross profit and ending inventory under weighted average inventory method.

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