Question

Up-to-Date Election Center began December with 90 units of merchandise inventory that cost $80 each During Decemberthere made the wing purchases RB Click the con low the purchases Uplo Dates the periodic inventory system and the physical count at December indicates that units of merchandise for en hand Read the requirements Requirement. Deforme the ending merchandise ventory and cost of goods amounts for the December financial statements using the FIFO, UFO, and weighted average verlorycoing methods O Weighted average Ending vendory Data Table Cost of goods sold Nequirement Sales revenue for December totaled 528,000 Compute Up-to-Duters profil for Decemberg each FIFO Cost LIFO Cost Weighted average Dec 3 20 12 305 18 45 each 37 each $ 90 each Gross profil income for Up-10-Date? Why? Requirement. Which method w result in the lowest income taxes for Up-to-Date? Why? Which method will result in the highest The UFO method will result in the lowest income taxes because under this method company's gros pris the west Which method will result in the highest income for Up - 10- e? Why? The FIFO method will result in the highest net income because under this method company's gross profits the highest

Answer 1

Requirement 1:

Ending inventory-

Ending inventory: FIFO = $7,480 LIFO = $7,575 Weighted average = $7250 Solution: Ending inventory calculations- FIFO: Under FIFO the early purchased goods are sold first and then the latest goods are sold. As a result, ending inventory has latest units. Dec 18 Dec 12 Dec 3 Ending inventory Calculations 45 units @ $90 30 units @ $87 10 units @ $82 85 units Amount $4,050 $2,610 $820 $7,480

LIFO: Under LIFO the latest goods are sold first and then the earlier goods are sold. As a result, ending inventory has earlier units. Dec 3 Dec 12 Dec 18 Ending inventory Calculations 20 units @ $82 30 units @ $87 35 units @ $90 85 units Amount $1,640 $2.610 $3,325 $7,575 Weighted average: Under Weighted average ending inventory is valued at unit price of goods available for sale. Calculations 80 units @ $80 Amount $6,400 Beginning inventory (+) Purchases: Dec 3 Dec 12 Dec 18 Goods available for sale Per unit cost Ending inventory 20 units @ $82 30 units @ $87 45 units @ $90 175 units $14,925/175 units = $85.29 85 units @ $85.29 $1,640 $2,610 $4,275 $14,925 $7250

Cost of goods sold:

Cost of goods sold: FIFO = $7445 LIFO = $7350 Weighted average = $7675 Solution: Cost of goods sold calculations- FIFO: calculations 80 units @ $80 Amount $6,400 Beginning inventory (+) Purchases: Dec 3 Dec 12 Dec 18 Goods available for sale (-) Ending inventory Cost of goods sold 20 units @ $82 30 units @ $87 45 units @ $90 175 units $1,640 $2,610 $4,275 $14,925 $7480 $7445

LIFO: A calculations 80 units @ $80 mount $6,400 Beginning inventory (+) Purchases: Dec 3 Dec 12 Dec 18 Goods available for sale (-) Ending inventory Cost of goods sold 20 units @ $82 30 units @ $87 45 units @ $90 175 units $1,640 $2,610 $4,275 $14,925 $7575 $7350 Weighted average: calculations 80 units @ $80 Amount $6,400 Beginning inventory (+) Purchases: Dec 3 Dec 12 Dec 18 Goods available for sale (-) Ending inventory Cost of goods sold 20 units @ $82 30 units @ $87 45 units @ $90 175 units $1,640 $2,610 $4,275 $14,925 $7250 $7675

Requirement 2:

Gross profit:

Gross profit: FIFO- Sales (-) Cost of goods sold Gross profit Amount $28000 ($7445) $20555 LIFO- Sales (-) Cost of goods sold Gross profit Amount $28000 ($7350) $20650 Weighted average- Sales (-) Cost of goods sold Gross profit Amount $28000 ($7675) $20325

Requirement 3:

The Weighted average method will result in the lowest income taxes because under this method company's gross profit is lowest.

The LIFO method will result in the highest net income because under this method company's gross profit is the highest.