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Concept explainers
(a)
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
To Prepare: The comparative condensed income statements for 2017 under FIFO and LIFO.
(b) (1)
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 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 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 explain: the reason for the excess of cash available under LIFO than under FIFO.
(5)
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
Financial Accounting, Binder Ready Version: Tools for Business Decision Making
- Part A Maharaj Garage & Car Supplies sells a variety of automobile cleaning gadgets including a variety of hand vacuums. The business began the first quarter (January to March) of 2024 with 20 (Mash up Dirt) deep clean, cordless vacuums at a total cost of $126,800. During the quarter, the business completed the following transactions relating to the "Mash up Dirt" brand. January 8 January 31 February 4 February 10 February 28 March 4 March 10 105 vacuums were purchased at a cost of $6,022 each. In addition, the business paid a freight charge of $518 cash on each vacuum to have the inventory shipped from the point of purchase to their warehouse. The sales for January were 85 vacuums which yielded total sales revenue of $768,400. (25 of these units were sold on account to Mandys Cleaning Supplies, a longstanding customer) A new batch of 65 vacuums was purchased at a total cost of $449,800 8 of the vacuums purchased on February 4 were returned to the supplier, as they were either not of…arrow_forwardQuick answer of this accounting questionsarrow_forwardNeed help with this question solution general accountingarrow_forward
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