Question

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 it uses a periodic inventory system. Assume its accounting records provided the Following information at the end of the annual accounting period. December 31 Unit Units Cost 1,500 $24 Transactions a. Inventory. Beginning for the years b. Purchase, March 5 c. Purchase, September 19 d. Sale, April 15 (sold for $69 per unit) c. Sale, October 31 bold for $72 per unit) 1. Operating expenses (excluding income tax expense). S406,000 25 27 7,500 3,500 2.400 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 ce 4. Prepare an income statement that shows the FIFO method, LIFO method and weighted average method. 5. Which Inventory costing method minimizes Income taxes? Complete this question by entering your answers in the tabs below. Required Required Required Required Required 12 Compute the cost of ending inventory and cost of goods sold under (a) FIFO, (b) LIFO, and (c) weighted average cost. Cost of Ending Inventory Cost of Goods Sold FIFO LIFO Weighted Average Cost Required 2 Required 4 >

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Answer are highlighted in yellow: Solution: Cost of Cost of Ending Inv. Goods sold 3) FIFO 97000 221000 LIFO 88500 229500 226416 Weighted Average (WA) 91584 Working: Ending Inventory Total Cost Quantity Unit Cost Total Cost a) FIFO Goods avaiable for sale Cost of Goods Sold Quantity Unit Cost Total Cost Quantity Unit Cost 24.00 $ Date Beg. 1500 24.00 $ 36,000 1500 $ $ 36,000 100 $ 25.00 $ 187500 185000 7500 S 25.00 7400 $ Mar.05 2,500 25.00 Sep.15 Total 3500 $ 27.00 $ 94,500 3500 $ 27.00 $ 94,500 $ 12500 318000 8900 221000 3600 97,000 Ending Inventory Total Cost Quantity Unit Cost Total Cost 1500 $ 24.00 $ 36,000 LIFO b) Goods avaiable for sale Cost of Goods Sold Quantity Unit Cost Total Cost Quantity Unit Cost Date Beg. 1500 $ 24.00 $ 36,000 2100 $ 25.00 $ 52,500 7500 $25.00 5400 $ 135000 187500 Mar.05 25.00 3500 $ 27.00 $ 94,500 3500 $ 27.00 $ $ Sep.15 94,500 Total 12500 318000 229500 88,500 3600 8900 (14670/1630) Weighted Average Cost per unit 25.44 c) WA Goods avaiable for sale Cost of Goods Sold Ending Inventory Total Cost Quantity Unit Cost Total Cost Quantity Unit Cost Total Cost Quantity Unit Cost 1500 $ 24.00 $ 36,000 Date $ $ Jan.01 187500 7500 S 25.00 Feb.11 May.18 Total 3500 $ 27.00 $ 94,500 8900 $ 3600 $ 25.44 $ 91,584 226416 25.44 8900 226416 12500 3600 91,584 318000