Question

Courtney Company uses a periodic inventory system. The following data were available: beginning inventory, 1,500 units at $30; purchases, 4,500 units at $40; operating expenses (excluding income taxes), $99,000; ending inventory per physical count at December 31, 1,500 units; sales price per unit, $70; and average income tax rate, 30%. Required: 1. Prepare income statements under the FIFO, LIFO, and weighted average costing methods. (Do not round intermediate calculations. Round your final answers to the nearest dollar amount.) Units FIFO LIFO Weighted Average $ *Cost of Goods Sold Equation: Beginning Inventory r Purchases Goods Available for Sale Ending Inventory Cost of Goods Sold 1,500 4,500 6,000 1,500 4,500 $ 45,000 180,000 225,000 42,000 $ 183,000 $ 45,000 180,000 225,000 37,500 $ 187,500 45,000 180,000 225,000 56,250 168,750 ; $ Inventory Costing Method FIFO LIFO Weighted Average Income Statement Units Sales Revenue Cost of Goods Sold* Gross Profit 0 0 Operating Expenses Income from Operations Income Tax Expense 99,000 (99,000) 99,000 (99,000) 0 99,000 (99,000) Net Income $ (99,000) $ (99,000) $ (99,000)

Answer 1

Income Statement Sales Revenue Less : Cost of Good Sold Gross Profit Less : Operating expenses Income from Operations Less : Income tax expense @ 30 % Net Income Inventory Costing method Weighted Units FIFO LIFO Average 4500 $ 315,000$ 315,000$ 315,000 4500 $ (165,000) $ (180,000) $ (168,750) $ 150,000 $ 135,000 $ 146,250 $ (99,000) $ (99,000) $ (99,000) $ 51,000$ 36,000 $ 47,250 $ (15,300) $ (15,300) $ (15,300) $ 35,700 $ 20,700$ 31,950 Sales Revenue = 4500 * $ 70 = $ 315,000

Computation of Cost of Goods Sold Units FIFO Beginning Inventory Add : Purchases Goods available for sale Less : Ending Inventory Cost of Goods Sold 1500 $ 45,000 $ 4500 $ 180,000 $ 6000 $ 225,000 $ -15001 $ (60,000) $ 4500 $ 165,000 $ Weighted LIFO Average 45,000 $ 45,000 180,000 $ 180,000 225,000 $ 225,000 (45,000) $ (56,250) 180,000 $ 168,750 Cost of beginning inventory = 1500 * $ 30: $ Cost of Purchases = 4500 * $ 40 = $ 45,000 180,000

Cost of ending inventory Under FIFO - Periodic inventory method. $ 60,000 Ending Inventory = 1500 * $ 40 = (from purchases ) LIFO - Periodic inventory method. Ending Inventory = 1500 * $ 30 = $ 45,000 (from beginning inventory) Weighted Average - Periodic inventory method. Ending Inventory = 1500 * $ 37.50 = $ 56,250 Weighted average cost per unit = [ ( 1500 * $ 30 ) + ( 4500 * $ 40 )]/(1500+ 4500) = ( 45000 + 180000) / 6000 = 225000 / 6000 = $ 37.50