Question

S6-2 (similar to) Question Help Bank Copy Center sells laser printers and supplies. Assume Bank Copy Center started the year with 90 containers of ink (average cost of $9.20 each, FIFO cost of $8.80 each, LIFO cost of $7.90 each). During the year, Bank Copy Center purchased 720 containers of ink at $10.10 and sold 570 units for $22.00 each. Bank Copy Center paid operating expenses throughout the year, a total of $3,750. Ignore income taxes for this exercise. Prepare Bank Copy Center's income statement for the current year ended December 31 under the average, FIFO, and LIFO inventory costing methods. Include a complete statement heading. Complete the income statement by selecting the appropriate heading and income statement labels, and then calculating the amounts for each of the three required inventory methods. (Calculate unit costs to the nearest cent. Round all other calculations to the nearest whole dollar.)

Answer 1

Periodic inventory System: In this system, the cost of sales and inventory are determined as the end of the accounting period. Step1 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 Date Unit Rate Amount Opening inventory 90 $9.20 $828 Purchase 720 $10.10 $7,272 810 $8,100 Average Cost ($8100/810] $10 Particulars Unit Rate Amount Cost of Good Sold 570 $10.00 $5,700 Ending inventory 240 $10.00 $2,400 90 Step2 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. Cost of Goods Sold Date Unit Rate / Amount Opening inventory $8.80 $792 Purchase 480 $10.10 $4,848 570 $5,640 Step3 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. Cost of Goods Sold Date Unit Rate Amount Purchase 570 $10.10 $5,757 Ans Bank Copy Centre Income Statement Particulars Average Cost FIFO LIFO Sales (570 x $22] $12,540 $12,540 $12,540 Less: Cost of Good Sold ($5,700) ($5,640) ($5,757) Gross Profit $6,840 $6,900 $6,783 Less: Operating Expense ($3,750) ($3,750) ($3,750) Net Income $3,090 $3,150 $3,033