Question

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Saved Help E7-7 Analyzing and Interpreting the Financial Statement Effects of FIFO, LIFO, and Weighted Average Cost [LO 7-3] Scoresby Inc. tracks the number of units purchased and sold throughout each year but applies its inventory costing method at the end of the year, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31. Units 1,500 Unit Cost $31 Transactions a. Inventory, Beginning For the year: b. Purchase, March 5 c. Purchase, September 19 d. Sale, April 15 (sold for $76 per unit) e. Sale, October 31 (sold for $79 per unit) f. Operating expenses (excluding income tax expense), $398,000 7,500 3,500 2,200 6,500 Required: 1. Calculate the number and cost of goods available for sale. 2. Calculate the number of units in ending Inventory 3. Compute the cost of ending inventory and cost of goods sold under (a) FIFO. (b) LIFO, and (c) weighted average cost. 4. Prepare an income statement that shows the FIFO method, LIFO method and weighted average method. 6. Which inventory costing method minimizes income taxes? Complete this question by entering your answers in the tabs below. < Prev 2 of 6 !! Next >

Answer 1

FIFO - PERIODIC METHOD
		PURHASES			COST OF GOODS SOLD			ENDING INVENTORY
Date	Particulars	Units	Rate	Total	Units	Rate	Total	Units	Rate	Total
Jan,01	Beginning inventory	1500	$             31.00	$46,500
Mar, 05	Purhcases	7500	$             32.00	$2,40,000
Sept, 19	Purhcases	3500	$             34.00	$1,19,000
	Goods Available for Sales	12500		$4,05,500
	SALES - 8,700 units				1500	$             31.00	$46,500
					7200	$             32.00	$2,30,400	300	$         32.00	$9,600
								3500	$         34.00	$1,19,000
					8,700		$2,76,900	3800		$1,28,600
LIFO - PERIODIC METHOD
		PURHASES			COST OF GOODS SOLD			ENDING INVENTORY
Date	Particulars	Units	Rate	Total	Units	Rate	Total	Units	Rate	Total
Jan,01	Beginning inventory	1500	$             31.00	$46,500
Mar, 05	Purhcases	7500	$             32.00	$2,40,000
Sept, 19	Purhcases	3500	$             34.00	$1,19,000
	Goods Available for Sales	12500		$4,05,500
	SALES - 8,700 units				3500	$             34.00	$1,19,000
					5200	$             32.00	$1,66,400	2300	$         32.00	$73,600
								1500	$         31.00	$46,500
					8,700		$2,85,400	3800		$1,20,100
AVERAGE COST - PERIODIC METHOD
		PURHASES			COST OF GOODS SOLD			ENDING INVENTORY
Date	Particulars	Units	Rate	Total	Units	Rate	Total	Units	Rate	Total
Jan,01	Beginning inventory	1500	$             31.00	$46,500
Mar, 05	Purhcases	7500	$             32.00	$2,40,000
Sept, 19	Purhcases	3500	$             34.00	$1,19,000
	Goods Available for Sales	12500	$             32.44	$4,05,500
	SALES - 8,700 units				8700	$             32.44	$2,82,228	3800	$         32.44	$1,23,272
					8,700		$2,82,228	3800		$1,23,272
ANSWER = 1
	Number of units avaialble for sales =	12,500 units
	Cost of Goods available for sold	$4,05,500
ANSWER = 2	Number of Ending inventory	3,800 Units
ANSWER = 3		FIFO	LIFO	WEIGHT. AVG .
	Ending inventory	$1,28,600	$1,20,100	$1,23,272
	Cost of Good Sold	$2,76,900	$2,85,400	$2,82,228
ANSWER = 4	INCOME STATEMENT	FIFO	LIFO	WEIGHT. AVG .
	Sales Revenue (2,200 X $ 76 + 6,500 X $ 79)	$6,80,700	$6,80,700	$6,80,700
	Less: Cost of Goods Sold	$2,76,900	$2,85,400	$2,82,228
	Gross Profit	$4,03,800	$3,95,300	$3,98,472
ANSWER = 5	LIFO costing method will produce lowest income tax