Question

Required information [The following information applies to the questions displayed below.] Daniel Company uses a periodic inventory system. Data for the current year: beginning merchandise inventory (ending inventory December 31, prior year), 2,000 units at $38; purchases, 8,000 units at $40; expenses (excluding income taxes), $184,500; ending inventory per physical count at December 31, current year, 1,800 units; sales, 8,200 units; sales price per unit, $75; and average income tax rate, 30 percent. Required: 1-a. Compute cost of goods sold under the FIFO, LIFO, and average cost inventory costing methods. 1-b. Prepare income statements under the FIFO, LIFO, and average cost inventory costing methods. Complete this question by entering your answers in the tabs below. Required 1A Required 1B Compute cost of goods sold under the FIFO, LIFO, and average cost inventory costing methods. (Do not round your intermediate calculations.) Inventory Costing Method FIFO LIFO Average Cost Cost of Goods Sold Beginning inventory Purchases Goods available for sale Ending inventory Cost of goods sold Units 2,000 8,000 10,000 1,800 0 0
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Answer 1

Ans 1-a Periodic inventory System: In this system, the cost of sales and inventory are determined as the end of the accounting period. First in, first out method (FIFO): In this method it is assumed that inventory which is purchased first will be sold first and the inventory will consist of recent purchases. Ending Inventory Units Cost Total 1800 $40.00 $72,000.00 Last in, first out method (LIFO): In this method it is assumed that inventory which is purchased last will be sold first and the inventory will consist of old purchases. Ending Inventory Units Cost Total 1800 $38.00 $68,400.00 In weighted average cost method per unit purchase is derived by adding cost opening inventory and purchase made during the year and then dividing it by the adding the units of opening inventory and units purchased during the year Average Cost Ending Inventory Units Cost Total Units Cost Total 2000 $38.00 $76,000.00 1800 $39.60 $71,280.00 8000 $40.00 $3,20,000.00 10000 $3,96,000.00 Average Cost ($396000/10000] $39.60 Cost of Good Sold Beginning Inventory Add: Purchases Goods Available for sale Less: Ending Inventory Cost of Good Sold Units 2,000 8,000 10,000 1,800 8,200 Inventory Costing Method FIFO LIFO $76,000 $76,000 $3,20,000 $3,20,000 $3,96,000 $3,96,000 $72,000 $68,400 $3,24,000 $3,27,600 Average Cost $76,000 $3,20,000 $3,96,000 $71,280 $3,24,720 L

Ans 1-b | Income Statement Sales Revenue (8200 x $75] Less: Cost of Good sold Goods Available for sale Less: Expenses Net Income Before tax Less: Income Tax @ 30% Net Income FIFO $6,15,000 $3,24,000 $2,91,000 $1,84,500 $1,06,500 $31,950 $74,550 LIFO $6,15,000 $3,27,600 $2,87,400 $1,84,500 $1,02,900 $30,870 $72,030 Average Cost $6,15,000 $3,24,720 $2,90,280 $1,84,500 $1,05,780 $31,734 $74,046