Question

QP Corp. sold 5,410 units of its product at $45.90 per unit during the year and incurred operating expenses of $6.90 per unit in selling the units. It began the year with 690 units in inventory and made successive purchases of its product as follows. Jan. 1 Beginning inventory Feb. 20 Purchase May 16 Purchase Oct. 3 Purchase Dec. 11 Purchase Total 690 units @ $18.90 per unit 1,590 units @ $19.90 per unit 790 units @ $20.90 per unit 490 units @ $21.90 per unit 3,390 units @ $22.90 per unit 6,950 units Required: 1. Prepare comparative income statements for the three inventory costing methods of FIFO, LIFO, and weighted average which includes a detailed cost of goods sold section as part of each statement. The company uses a periodic inventory system, and its income tax rate is 30%. (Round your average cost per unit to 2 decimal places and round your final answers to nearest whole dollar amount.) QP CORP. Income Statements Comparing FIFO, LIFO, and Weighted Average For Year Ended December 31 FIFO LIFO Weighted Average Sales Cost of goods sold: Beginning inventory, Jan. 1 Cost of purchases Cost of goods available for sale Less: Ending inventory, Dec. 31 Cost of goods sold 0 0 Gross profit 0 0 Operating expenses Income before taxes 0 0 Income taxes expense Net income $ 0 $ 0 $ 0

Answer 1

FIFO method states that goods purchased first are sold first
LIFO Method states that goods purchased later are sold first
Average cost method takes into account average cost for the purpose of calculation
Weighted average cost per unit = Total cost of goods available/Total units available
=(690*18.90+1590*19.90+790*20.90+490*21.90+3390*22.90)/(690+1590+790+490+3390)
21.52	per unit
	FIFO	LIFO	Weighted average
Sales	248,319	248,319	248,319
COGS
Beginning Inventory	13,041	13,041	13,041
Cost of Purchases	136,514	136,514	136,514
Cost of goods available for sale	149,555	149,555	149,555
Less: Ending Inventory	35,266	29,956	33,141
Cost of goods sold	114,289	119,599	116,414
Gross Profit	134,030	128,720	131,905
Operating expenses	37,329	37,329	37,329
Income before taxes	96,701	91,391	94,576
Income tax expense	29,010	27,417	28,373
Net Income	67,691	63,974	66,203

LIFO Weighted average =5410*45.9 =5410*45.9 S A 1 FIFO method states that goods pure 2 LIFO Method states that goods pure 3 Average cost method takes into aco 4 Weighted average cost per unit = To =(690*18.90+1590*19.90+790*20.9 6 =(690*18.9+1590*19.9+790*20.9+4 per unit 7 8 FIFO 9 Sales =5410*45.9 10 COGS 11 Beginning Inventory =690*18.9 12 Cost of Purchases =1590*19.9+790*20.9+490*21.9+3390*22.9 13 Cost of goods available for sale =SUM(B11:B12) 14 Less: Ending Inventory =1540*22.9 15 Cost of goods sold =B13-B14 16 Gross Profit =B9-B15 17 Operating expenses =5410*6.9 18 Income before taxes =B16-B17 19 Income taxex expense =B18*30% 20 Net Income =B18-B19 =690*18.9 =1590*19.9+790*20.9+490*21.9+3390*22.9 =SUM(C11:C12) =690*18.9+850*19.9 =C13-C14 =C9-C15 =5410*6.9 =C16-C17 =C18*30% =C18-C19 =690*18.9 =1590*19.9+790*20.9+490*21.9+3390*22.9 =SUM(D11:012) = 1540*21.52 =D13-D14 =D9-D15 =5410*6.9 =D16-D17 D18*30% =D18-019