Question

o bous up or sale, they cleaned and WOULUI 3980. Determine the cost of inventory. C2 Company reported the following January purchases and sales data for its only product Date Exercise 6-3 Perpetual: Inventory costing methods Units Acquired at Cost Units Sold at Retail 140 units @ $6.00 = $ 840 100 units @ $15 Jan. 1 Jan. 10 Jan. 20 Jan. 25 Jan. 30 Activities Beginning inventory ............ Sales. Purchase Sales..... Purchase Totals.. 60 units @ $5.00 = 300 80 units a $15 180 units @ $4.50 = 380 units 810 $1,950 180 units equired The company uses a perpetual inventory system. Determine the cost assigned to ending inventory and to cost of oods sold using (a) specific identification, (b) weighted average, (c) FIFO, and (d) LIFO.(Round per unit costs nd inventory amounts to cents.) For specific identification, ending inventory consists of 200 units, where 180 are from the January 30 purchase, 5 are from the January 20 purchase, and 15 are from beginning inventory. Check Ending inventory LIFO, $930; WA $918 Exercise 6.4 Perpetual: Income effects of inventory methods Al Ilse the data in Exercise 6-3 to prepare comparative income statements for the month of January for Laker Company similar to those shown in m any similar to those shown in Exhibit 6.8 for the four inventory methods. Assume expenses are $1,250 and the applicable income tax rate is 40%. (Round amounts to cents.) 1. Which method yields the highest net income? 2. Does net income using weighted average fall above, between, or below that using FIFO and LIFO? If costs were rising instead of falling, which method would yield the highest net income? Exercise 6-5A Periodic: Inventory costing p2 Refer to the information in costs assigned to ending inve the information in Exercise 6-3 and assume the periodic inventory system is used. Determine the igned to ending inventory and to cost of goods sold using (a) specific identification, (b) weighted FIFO, and (d) LIFO. (Round per unit costs and inventory amounts to cents.) For specific ending inventory consists of 200 units, where 180 are from the January 30 purchase, 5 are y 20 purchase, and 15 are from beginning inventory. identif fro innamontements for the month of Fyercise 6.6A

Answer 1

Answer with working is given below

FIFO LIFO Specific identification Method $925 $1,025 Weighted Average $918 $1,032 Ending Inventory Cost of Goods sold $910 $1,040 $930 $1,020 FIFO LIFO Comparative Income Statement for January month Specific Weighted identification Average Method Sales $2,700 $2,700 $2,700 Cost of Goods sold $1,025 $1,032 $1,040 Gross profit $1,675 $1,668 $1,660 Operating expense $1,250 $1,250 $1,250 Income before tax $425 $418 $410 Tax at 40% $1701 $167 $164 Net Income $255 $251 $246 $2,700 $1,020 $1,680 $1,250 $430 $172 $258 1 LIFO method yields the highest net income 2 Yes the weighted average method income falls between FIFO and LIFO 3 FIFO would have resulted in higher income if costs were rising Reason being FIFO carries the latest purchase in inventory and it would be valued at higher prices Specific identification method Purchase Unit Total Cost of Goods sold Unit Total Quantity Cost Cost Inventory on Hand Total Quantity Unit Cost Cost 140 $6.00 Quantity Cost $840 Jan 20 Jan 30 Opening balance Purchase Purchase $5.00 $4.50 $300 $810 180 Sale 125 55 $6.00 $5.00 $750 15 $2755 180 $1,025 200 $6.00 $5.00 $4.50 $90 $25 $810 $925 Totals $1,110 180 Opening stock Add : Purchase 240 $840 $1,110 $1,950 $925 $1,025 Less: Closing stock Cost of Goods sold Weighted method using Perpetual Inventory system Purchase Unit Cost Quantity Jan 1 Jan 10 Jan 20 Opening balance Sale Purchase 60 $5.00 Cost of Goods sold Inventory on Hand Total Unit Total Unit Total Cost Quantity Cost Cost Quantity Cost Cost 140 $6.00 $840 100 $6.00 $600 40 $6.00 $240 $300 $6.00 $240 $5.00 $300 $5.40 $540 80 $5.40 $432 $5.40 $108 $810 20 $5.40 $108 180 $4.50 $810 $1,110 180 $1,032 200' $4.59 $918 Jan 25 Jan 30 Sale Purchase 180 $4.50 Totals Opening stock Add: Purchase 240 $840 $1,110 $1,950 $918 $1,032 Less: Closing stock Cost of Goods sold FIFO method with Perpetual inventory Purchase Unit Cost Total Cost Cost of Goods sold Unit Total Quantity Cost Cost Quantity Inventory on Hand Total Quantity Unit Cost Cost 140 $6.00 $840 Jan 1 Opening balance 100 $6.00 $600 40 $6.00 Jan 10 Jan 20 Sale Purchase 60 $5.00 $300 $6.00 $240 $240 $300 $5.00 Jan 25 Sale 40 20 $6.00 $5.00 $240 $200 20 Jan 30 Purchase 180 $4.50 $810 20 $5.00 $5.00 $4.50 $100 $100 $810 $910 180 200 Totals $1,1101180 $1,040 Opening stock Add: Purchase 240 $840 $1,110 $1,950 $910 $1,040 Less: Closing stock Cost of Goods sold LIFO Cost method with Perpetual Inventory Purchase Unit Cost Cost of Goods sold Unit Total Quantity Cost Cost Total Cost Quantity Inventory on Hand Unit Total Quantity Cost Cost 140 $6.00 $840 Jan 1 Opening balance 100 $6.00 $600 40 Jan 10 Jan 20 Sale Purchase 60 $5.00 $300 40 $6.00 $6.00 $5.00 $240 $240 $300 Jan 25 Sale 60 20 $5.00 $6.00 $300 $120 Jan 30 Purchase 180 $4.50 $810 20 20 180 200 $6.00 $6.00 $4.50 $120 $120 $810 $930 Totals $1,110 180 $1,020 Opening stock Add: Purchase 240 $840 $1,110 $1,950 $930 $1,020 Less: Closing stock Cost of Goods sold