In First-in-First-Out method, the cost of initial purchased items are sold first. The value of the ending inventory consists the recent purchased items. In Last-in-First-Out method, the cost of last purchased items are sold first. The value of the closing stock consists the initial purchased items. The income statement : This is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned and expenses incurred by the company over a specific period of time. An income statement is also known as an operations statement, an earnings statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses. To Prepare: The comparative condensed income statements for 2017 under FIFO and LIFO.

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Answer 1

Question

Chapter 6, Problem 6.4AP

(a)

To determine

In First-in-First-Out method, the cost of initial purchased items are sold first. The value of the ending inventory consists the recent purchased items.

In Last-in-First-Out method, the cost of last purchased items are sold first. The value of the closing stock consists the initial purchased items.

The income statement: This is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned and expenses incurred by the company over a specific period of time. An income statement is also known as an operations statement, an earnings statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses.

To Prepare: The comparative condensed income statements for 2017 under FIFO and LIFO.

(b) (1)

To determine

To Explain: the reason for the method of inventory cost flow which produces the inventory amount that most closely approximates the amount that would have to be paid to replace the inventory.

(2)

To determine

To Explain: the reason for the method of inventory cost flow which produces the net income amount that is a more likely indicator of next period’s net income.

(3)

To determine

To Explain: the reason for the method of inventory cost flow which is most likely to approximate the actual physical flow of the goods.

(4)

To determine

To explain: the reason for the excess of cash available under LIFO than under FIFO.

(5)

To determine

To explain: the amount of gross profit under FIFO that is illusionary in comparison with the gross profit under LIFO.

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The management of Tudor Living asks for your help in determining the comparative effects of the FIFO and average-cost inventory cost flow methods. For 2020, the accounting records provide the data shown below. Units purchased consisted of 40,000 units at £4.00 on May 10; 60,000 units at £4.20 on August 15; and 20,000 units at £4.45 on November 20. Income taxes are 28%. Instructions a.Prepare comparative condensed income statements for 2020 under FIFO and average cost. (Show computations of ending inventory.) b.Answer the following questions for management: 1.Which inventory cost flow method produces the more meaningful inventory amount for the statement of financial position? Why? 2.Which inventory cost flow method is more likely to approximate the actual physical flow of the goods? Why? 3.How much more cash will be available for management under average-cost thanunder FIFO? Why?

The management of Sheffield Corp. asks your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods. For 2017, the accounting records show these data. Inventory, January 1 (9,340 units) $ 34,558 Cost of 119,140 units purchased 488,390 Selling price of 95,990 units sold 684,900 Operating expenses 113,080 Units purchased consisted of 35,340 units at $3.90 on May 10; 60,520 units at $4.10 on August 15; and 23,280 units at $4.40 on November 20. Income taxes are 26%. (a) Prepare comparative condensed income statements for 2017 under FIFO and LIFO. (Round answers to 0 decimal places, e.g. 5,125.)

The following data are available for Sellco for the fiscal year ended on January 31, 2023: Sales Beginning inventory Purchases, in chronological order Required: a. Calculate cost of goods sold and ending Inventory under the cost flow assumptions, FIFO, LIFO and Weighted average (using a periodic Inventory system): b. Assume that net income using the weighted-average cost flow assumption is $15,600. Calculate net Income under FIFO and LIFO. 790 units 220 units@ $4 310 units @ $5 410 units@ $6 220 units@ $7 Complete this question by entering your answers in the tabs below. Required A Required B Calculate cost of goods sold and ending inventory under the cost flow assumptions, FIFO, LIFO and Weighted average (using a periodic inventory system): Note: Round unit cost to 2 decimal places. FIFO LIFO Weighted average Cost of Goods Sold Ending Inventory

Answer 2

Question

Chapter 6, Problem 6.4AP

(a)

To determine

In First-in-First-Out method, the cost of initial purchased items are sold first. The value of the ending inventory consists the recent purchased items.

In Last-in-First-Out method, the cost of last purchased items are sold first. The value of the closing stock consists the initial purchased items.

The income statement: This is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned and expenses incurred by the company over a specific period of time. An income statement is also known as an operations statement, an earnings statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses.

To Prepare: The comparative condensed income statements for 2017 under FIFO and LIFO.

(b) (1)

To determine

To Explain: the reason for the method of inventory cost flow which produces the inventory amount that most closely approximates the amount that would have to be paid to replace the inventory.

(2)

To determine

To Explain: the reason for the method of inventory cost flow which produces the net income amount that is a more likely indicator of next period’s net income.

(3)

To determine

To Explain: the reason for the method of inventory cost flow which is most likely to approximate the actual physical flow of the goods.

(4)

To determine

To explain: the reason for the excess of cash available under LIFO than under FIFO.

(5)

To determine

To explain: the amount of gross profit under FIFO that is illusionary in comparison with the gross profit under LIFO.

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Answer 3

Question

Chapter 6, Problem 6.4AP

(a)

To determine

In First-in-First-Out method, the cost of initial purchased items are sold first. The value of the ending inventory consists the recent purchased items.

In Last-in-First-Out method, the cost of last purchased items are sold first. The value of the closing stock consists the initial purchased items.

The income statement: This is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned and expenses incurred by the company over a specific period of time. An income statement is also known as an operations statement, an earnings statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses.

To Prepare: The comparative condensed income statements for 2017 under FIFO and LIFO.

(b) (1)

To determine

To Explain: the reason for the method of inventory cost flow which produces the inventory amount that most closely approximates the amount that would have to be paid to replace the inventory.

(2)

To determine

To Explain: the reason for the method of inventory cost flow which produces the net income amount that is a more likely indicator of next period’s net income.

(3)

To determine

To Explain: the reason for the method of inventory cost flow which is most likely to approximate the actual physical flow of the goods.

(4)

To determine

To explain: the reason for the excess of cash available under LIFO than under FIFO.

(5)

To determine

To explain: the amount of gross profit under FIFO that is illusionary in comparison with the gross profit under LIFO.

Expert Solution & Answer

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Answer 4

Question

Chapter 6, Problem 6.4AP

(a)

To determine

In First-in-First-Out method, the cost of initial purchased items are sold first. The value of the ending inventory consists the recent purchased items.

In Last-in-First-Out method, the cost of last purchased items are sold first. The value of the closing stock consists the initial purchased items.

The income statement: This is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned and expenses incurred by the company over a specific period of time. An income statement is also known as an operations statement, an earnings statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses.

To Prepare: The comparative condensed income statements for 2017 under FIFO and LIFO.

(b) (1)

To determine

To Explain: the reason for the method of inventory cost flow which produces the inventory amount that most closely approximates the amount that would have to be paid to replace the inventory.

(2)

To determine

To Explain: the reason for the method of inventory cost flow which produces the net income amount that is a more likely indicator of next period’s net income.

(3)

To determine

To Explain: the reason for the method of inventory cost flow which is most likely to approximate the actual physical flow of the goods.

(4)

To determine

To explain: the reason for the excess of cash available under LIFO than under FIFO.

(5)

To determine

To explain: the amount of gross profit under FIFO that is illusionary in comparison with the gross profit under LIFO.

Expert Solution & Answer

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See solution

Answer 5

Chapter 6, Problem 6.4AP

(a)

To determine

In First-in-First-Out method, the cost of initial purchased items are sold first. The value of the ending inventory consists the recent purchased items.

In Last-in-First-Out method, the cost of last purchased items are sold first. The value of the closing stock consists the initial purchased items.

The income statement: This is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned and expenses incurred by the company over a specific period of time. An income statement is also known as an operations statement, an earnings statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses.

To Prepare: The comparative condensed income statements for 2017 under FIFO and LIFO.

(b) (1)

To determine

To Explain: the reason for the method of inventory cost flow which produces the inventory amount that most closely approximates the amount that would have to be paid to replace the inventory.

(2)

To determine

To Explain: the reason for the method of inventory cost flow which produces the net income amount that is a more likely indicator of next period’s net income.

(3)

To determine

To Explain: the reason for the method of inventory cost flow which is most likely to approximate the actual physical flow of the goods.

(4)

To determine

To explain: the reason for the excess of cash available under LIFO than under FIFO.

(5)

To determine

To explain: the amount of gross profit under FIFO that is illusionary in comparison with the gross profit under LIFO.

Answer 6

Chapter 6, Problem 6.4AP

(a)

To determine

In First-in-First-Out method, the cost of initial purchased items are sold first. The value of the ending inventory consists the recent purchased items.

In Last-in-First-Out method, the cost of last purchased items are sold first. The value of the closing stock consists the initial purchased items.

The income statement: This is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned and expenses incurred by the company over a specific period of time. An income statement is also known as an operations statement, an earnings statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses.

To Prepare: The comparative condensed income statements for 2017 under FIFO and LIFO.

Answer 7

Chapter 6, Problem 6.4AP

(a)

To determine

In First-in-First-Out method, the cost of initial purchased items are sold first. The value of the ending inventory consists the recent purchased items.

In Last-in-First-Out method, the cost of last purchased items are sold first. The value of the closing stock consists the initial purchased items.

The income statement: This is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned and expenses incurred by the company over a specific period of time. An income statement is also known as an operations statement, an earnings statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses.

To Prepare: The comparative condensed income statements for 2017 under FIFO and LIFO.

Answer 8

(b) (1)

To determine

To Explain: the reason for the method of inventory cost flow which produces the inventory amount that most closely approximates the amount that would have to be paid to replace the inventory.

Answer 9

(b) (1)

To determine

To Explain: the reason for the method of inventory cost flow which produces the inventory amount that most closely approximates the amount that would have to be paid to replace the inventory.

Answer 10

(2)

To determine

To Explain: the reason for the method of inventory cost flow which produces the net income amount that is a more likely indicator of next period’s net income.

Answer 11

(2)

To determine

To Explain: the reason for the method of inventory cost flow which produces the net income amount that is a more likely indicator of next period’s net income.

Answer 12

(3)

To determine

To Explain: the reason for the method of inventory cost flow which is most likely to approximate the actual physical flow of the goods.

Answer 13

(3)

To determine

To Explain: the reason for the method of inventory cost flow which is most likely to approximate the actual physical flow of the goods.

Answer 14

(4)

To determine

To explain: the reason for the excess of cash available under LIFO than under FIFO.

Answer 15

(4)

To determine

To explain: the reason for the excess of cash available under LIFO than under FIFO.

Answer 16

(5)

To determine

To explain: the amount of gross profit under FIFO that is illusionary in comparison with the gross profit under LIFO.

Answer 17

(5)

To determine

To explain: the amount of gross profit under FIFO that is illusionary in comparison with the gross profit under LIFO.

Answer 18

Expert Solution & Answer

Answer 19

Expert Solution & Answer

Answer 20

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Answer 21

Ch. 6 - The key to successful business operations is...Ch. 6 - Prob. 2Q Ch. 6 - What is just-in-time inventory management? What...Ch. 6 - Prob. 4Q Ch. 6 - Prob. 5Q Ch. 6 - Prob. 6Q Ch. 6 - Prob. 7Q Ch. 6 - Prob. 8Q Ch. 6 - What is the major advantage and major disadvantage...Ch. 6 - The selection of an inventory cost flow method is...

Solution Summary: The author explains how to prepare comparative condensed income statements for 2017 under FIFO and LIFO.

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To Explain: the reason for the method of inventory cost flow which produces the inventory amount that most closely approximates the amount that would have to be paid to replace the inventory.

To Explain: the reason for the method of inventory cost flow which produces the net income amount that is a more likely indicator of next period’s net income.

To Explain: the reason for the method of inventory cost flow which is most likely to approximate the actual physical flow of the goods.

To explain: the reason for the excess of cash available under LIFO than under FIFO.

To explain: the amount of gross profit under FIFO that is illusionary in comparison with the gross profit under LIFO.

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Chapter 6 Solutions