1. To determine Compute the cost of goods sold under FIFO, LIFO and average cost inventory costing methods. Explanation Ending Inventory: It represents the quantity and price of the goods unsold and laying at the store at the end of a particular period. Cost of goods sold: Cost of goods sold is the accumulate total of all direct cost incurred in manufacturing the goods or the products which has been sold during a period. Cost of goods sold involves direct material, direct labor, and manufacturing overheads. First-in-First-Out: In First-in-First-Out method, the costs of the initially purchased items are considered as cost of goods sold, for the items which are sold first. The value of the ending inventory consists of the recent purchased items. Last-in-Last-Out: In Last-in-First-Out method, the costs of last purchased items are considered as the cost of goods sold, for the items which are sold first. The value of the closing stock consists of the initial purchased items. Weighted-average cost method: Under Weighted average cost method, the company calculates a new average cost after every purchase is made. It is determined by dividing the cost of goods available for sale by the units on hand. Working notes: Determine the amount of ending inventory under average cost: Ending Inventory = [ Units of ending invenotry × average cost per unit ] = 525 units × [ $ 27 , 825 875Units ] = 525 units × $ 31 2. To determine Prepare an income statement through pretax income for each method. 3. To determine Rank the three methods in order of income taxes paid and explain the basis for the ranking.

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ISBN: 9781259964947

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Publisher: MCG

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Inventory Valuation

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Chapter 7, Problem 9E

To determine

Compute the cost of goods sold under FIFO, LIFO and average cost inventory costing methods.

To determine

Prepare an income statement through pretax income for each method.

To determine

Rank the three methods in order of income taxes paid and explain the basis for the ranking.

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Chapter 7 Solutions

FINANCIAL ACCOUNTING

Ch. 7 - Prob. 3Q Ch. 7 - 4. Define goods available for sale. How does it...Ch. 7 - 5. Define beginning inventory and ending...Ch. 7 - 6. The chapter discussed tour inventory costing...Ch. 7 - 7. Explain how income can be manipulated when the...Ch. 7 - 8. Contrast the effects of LIFO versus FIFO on...Ch. 7 - 9. Contrast the income statement effect of LIFO...Ch. 7 - Prob. 10Q Ch. 7 - Explain briefly the application of the lower of...Ch. 7 - 12. When a perpetual inventory system is used,...

Ch. 7 - 1. Consider the following information: ending...Ch. 7 - 2. The inventory costing method selected by a...Ch. 7 - 3. Which of the following is not a component of...Ch. 7 - 4. Consider the following information: beginning...Ch. 7 - 5. Consider the following information: beginning...Ch. 7 - 6. An increasing inventory turnover...Ch. 7 - Prob. 7MCQ Ch. 7 - Which of the following regarding the lower of cost...Ch. 7 - 9. Which inventory method provides a better...Ch. 7 - Which of the following is false regarding a...Ch. 7 - Matching Inventory Items to Type of Business Match...Ch. 7 - Recording the Cost of Purchases for a...Ch. 7 - Identifying the Cost of Inventories for a...Ch. 7 - JCPenney Company, Inc., is a major department...Ch. 7 - M7-5 Matching Financial Statement Effects to...Ch. 7 - M7-6 Matching Inventory Costing Method Choices to...Ch. 7 - M7-7 Reporting Inventory under Lower of Cost or...Ch. 7 - M 7-8 Determining the Effects of Inventory...Ch. 7 - Determining the Financial Statement Effects of...Ch. 7 - Based on its physical count of inventory in its...Ch. 7 - Prob. 2E Ch. 7 - Prob. 3E Ch. 7 - Abercrombie and Fitch is a leading retailer of...Ch. 7 - Nittany Company uses a periodic inventory system....Ch. 7 - E7-6 Calculating Ending Inventory and Cost of...Ch. 7 - Emily Company uses a periodic inventory system. At...Ch. 7 - Givoly Inc. uses a periodic inventory system. At...Ch. 7 - Evaluating the Choice among Three Alternative...Ch. 7 - Following is partial information for the income...Ch. 7 - Daniel Company uses a periodic inventory system....Ch. 7 - H.T. Tan Company is preparing the annual financial...Ch. 7 - Sanchez Company was formed on January 1 of the...Ch. 7 - Dell Inc. is the leading manufacturer of personal...Ch. 7 - E7-1 5 Analyzing and Interpreting the Effects of...Ch. 7 - The following note was contained in a recent Ford...Ch. 7 - BorgWarner Inc. is a leading global supplier of...Ch. 7 - Several years ago, the financial statements of...Ch. 7 - Analyzing and Interpreting the Impact of an...Ch. 7 - Prob. 20E Ch. 7 - E7-21 (Chapter Supplement A) Analyzing the Effects...Ch. 7 - Assume that a retailer’s beginning inventory and...Ch. 7 - Prob. 23E Ch. 7 - Travis Company has just completed a physical...Ch. 7 - Prob. 2P Ch. 7 - Prob. 3P Ch. 7 - Analyzing and Interpreting Income Manipulation...Ch. 7 - Prob. 5P Ch. 7 - Jaffa Company prepared its annual financial...Ch. 7 - Evaluating the Effects of Manufacturing Changes on...Ch. 7 - An annual report for International Paper Company...Ch. 7 - The income statement for Pruitt Company summarized...Ch. 7 - P7-1 0 (Chapter Supplement A) Analyzing LIFO and...Ch. 7 - Prob. 1AP Ch. 7 - Prob. 2AP Ch. 7 - Prob. 3AP Ch. 7 - Analyzing and Interpreting the Effects of...Ch. 7 - Evaluating the Choice of Inventory Method When...Ch. 7 - Finding Financial Information Refer to the...Ch. 7 - Prob. 2CP Ch. 7 - Refer to the financial statements of American...Ch. 7 - Using Financial Reports: Interpreting the Effect...Ch. 7 - Prob. 5CP Ch. 7 - Prob. 6CP Ch. 7 - Prob. 7CP

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