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Concept explainers
Accounting for inventory using the periodic inventory system—FIFO, LIFO, and weighted-average, and comparing FIFO, LIFO, and weighted-average
Jepson Electronic Center began October with 90 units of merchandise inventory that cost $70 each. During October, the store made the following purchases:
Oct. 3 | 20 units@ $ 75 each |
12 | 40 units@ $ 78 each |
18 | 60 units@ $ 84 each |
Jepson uses the periodic inventory system, and the physical count at October 31 indicates that 110 units of merchandise inventory are on hand.
Requirements
1. Determine the ending merchandise inventory and cost of goods sold amounts for the October financial statements using the FIFO, LIFO, and weighted-average inventory costing methods.
2. Sales revenue for October totaled $27,000. Compute Jepson’s gross profit for October using each method.
3. Which method will result in the lowest income taxes for Jepson? Why? Which method will result in the highest net income for Jepson? Why?
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Chapter 6 Solutions
Horngren's Financial & Managerial Accounting (5th Edition)
- A company through no fault of its own, lost an entire building due to an earthquake on May 1, 2024. In preparing its insurance claim on the inventory loss, the company developed the following data: Inventory January 1, 2024, $350,000; sales and purchases from January 1, 2024, to May 1, 2024, $1,110,000 and $945,000, respectively. The company consistently reports a 40% gross profit. The estimated inventory on May 1, 2024, is:arrow_forwardWhat is the value of the company's total assets? General accountingarrow_forwardneed help this questionsarrow_forward
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