Exercise 5-6A Income tax effect of shifting from FIFO to LIFO LO 5-1
[The following information applies to the questions displayed below.]
The following information pertains to the inventory of Parvin
Company during Year 2:
Jan. 1 | Beginning Inventory | 750 | units | @ | $ | 33 | |
Apr. 1 | Purchased | 2,700 | units | @ | $ | 38 | |
Oct. 1 | Purchased | 950 | units | @ | $ | 41 | |
During Year 2, Parvin sold 4,000 units of inventory at $90 per unit
and incurred $45,000 of operating expenses. Parvin currently uses
the FIFO method but is considering a change to LIFO. All
transactions are cash transactions. Assume a 30 percent income tax
rate. Parvin started the period with cash of $82,000, inventory of
$24,750, common stock of $57,000, and retained earnings of
$49,750.
a. Record the above transactions in general journal form and post to T-accounts using (1) FIFO and (2) LIFO. Use a separate set of journal entries and T-accounts for each method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
c. Determine the amount of income tax that
Parvin would pay using each cost flow method.
d. Determine the cash flow from operating activities under FIFO and LIFO. (Amounts to be deducted should be indicated with minus sign.)
a. 1. FIFO:
General Journal | Debit | Credit |
$ | $ | |
Cash | 360,000 | |
Sales | 360,000 | |
Cost of Goods Sold | 149,900 | |
Inventory | 149,900 | |
Operating Expenses | 45,000 | |
Cash | 45,000 |
Inventory:
Jan 1 | 24,750 | Cost of Goods Sold | 149,900 |
April 1 | 102,600 | ||
Oct 1 | 38,950 | Dec 31 | 16,400 |
166,300 | 166,300 |
2. LIFO:
Debit | Credit | |
$ | $ | |
Cash | 360,000 | |
Sales | 360,000 | |
Cost of Goods Sold | 153,100 | |
Inventory | 153,100 | |
Operating Expenses | 45,000 | |
Cash | 45,000 |
c.
FIFO | LIFO | |
Sales | $ 360,000 | $ 360,000 |
Less: Cost of Goods Sold | 149,900 | 153,100 |
Gross Profit | $ 210,100 | $ 206,900 |
Operating Expenses | 45,000 | 45,000 |
Income before Taxes | 165,100 | 161,900 |
Income Tax ( 30 %) | $ 49,530 | $ 48,570 |
d. Cash from Operating Activities:
FIFO | LIFO | |
Cash receipts from sales | $ 360,000 | 360,000 |
Cash paid for inventory | (141,550) | (141,550) |
Cash paid for operating expenses | (45,000) | (45,000) |
Income Taxes Paid | (49,530) | (48,570) |
Net cash flows from Operating Activities | $ 123,920 | $ 124,880 |
Exercise 5-6A Income tax effect of shifting from FIFO to LIFO LO 5-1 [The following information...
Exercise 5-6A Income tax effect of shifting from FIFO to LIFO LO 5-1 [The following information applies to the questions displayed below.] The following information pertains to the inventory of Parvin Company during Year 2: Jan. 1 Beginning Inventory 750 units @ $ 33 Apr. 1 Purchased 2,700 units @ $ 38 Oct. 1 Purchased 950 units @ $ 41 During Year 2, Parvin sold 4,000 units of inventory at $90 per unit and incurred $45,000 of operating expenses. Parvin...
Chapter 5 Homework Required information Exercise 5-6 Income tax effect of shifting from FIFO to LIFO LO 5-1 (The following information applies to the questions displayed below.) Part 2 of 3 The following information pertains to the inventory of Parvin Company for Year 3: 11.11 points Jan. 1 Apr. 1 Oct. 1 Beginning inventory Purchased Purchased 400 units @ $17 3,000 units @ $22 900 units @ $23 eBook During Year 3, Parvin sold 3,655 units of inventory at $41...
The following information pertains to the inventory of Parvin Company during Year 2: Jan. 1 Beginning Inventory 400 units @ $ 30 Apr. 1 Purchased 2,150 units @ $ 35 Oct. 1 Purchased 600 units @ $ 38 During Year 2, Parvin sold 2,900 units of inventory at $90 per unit and incurred $47,000 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 30 percent income...
Required information [The following information applies to the questions displayed below.] The following information pertains to the inventory of Parvin Company during Year 2: Jan. 1 Beginning Inventory 600 units @ $ 37 Apr. 1 Purchased 3,050 units @ $ 42 Oct. 1 Purchased 800 units @ $ 45 During Year 2, Parvin sold 4,200 units of inventory at $85 per unit and incurred $51,500 of operating expenses. Parvin currently uses the FIFO method but is considering a change to...
Required information Esercise 56A Income tox effect of sfing om FiFO te UIFOLO S1 The following information applies to the questions displayed below The following information pertains to the inventory of Parvin Company during Year 2: Jan. 1 Beginning Inventory 55e units $35 Apr. 1 Purchased Oct. 1 Purchased 2,950 units $48 750 units $43 During Year 2, Parvin sold 4,000 units of inventory at $80 per unit and incurred $51,000 of operating expenses. Parvin currently uses the FIFO method...
Please show the calculation! Thank you.
Required information [The following information applies to the questions displayed below.] The following information pertains to the inventory of Parvin Company: Jan. 1 Apr. 1 Oct. 1 Beginning inventory Purchased Purchased 300 units 2,600 units 1,100 units @ @ @ $15 $20 $21 During 2018, Parvin sold 3,400 units of inventory at $43 per unit and incurred $16,300 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO....
The following information pertains to the inventory of Parvin Company during Year 2: Jan. 1 Beginning Inventory 400 units @ $ 30 Apr. 1 Purchased 2,150 units @ $ 35 Oct. 1 Purchased 600 units @ $ 38 During Year 2, Parvin sold 2,900 units of inventory at $90 per unit and incurred $47,000 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 30 percent income...
The following information pertains to the inventory of Parvin Company for Year 3: Jan. 1 Beginning inventory 400 units @ $ 19 Apr. 1 Purchased 2,500 units @ $ 24 Oct. 1 Purchased 1,100 units @ $ 25 During Year 3, Parvin sold 3,400 units of inventory at $41 per unit and incurred $18,000 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 30 percent income...
Exercise 5-19 Effect of inventory cost flow (FIFO, LIFO, and weighted average) on gross margin LO 5-6 (The following information applies to the questions displayed below.] The following information pertains to Mason Company for 2018: Beginning inventory Units purchased 90 units 310 units @ @ $40 $45 Ending inventory consisted of 30 units. Mason sold 370 units at $90 each. All purchases and sales were made with cash. Operating expenses amounted to $4100. a. Compute the gross margin for Mason...
** THE 6 JOURNAL ENTRIES**
1. Record entry merchandise inventory purchased for cash.
2. Record entry merchandise inventory purchased for cash.
3. Record sale of inventory for cash.
4. Record entry for cost of goods sold.
5. Record entry for operating expenses paid.
6. Record entry for income tax expenses paid.
Required information [The following information applies to the questions displayed below.) The following information pertains to the inventory of Parvin Company during Year 2 Jan. 1 Apr. 1 Oct....