Question

Requirements 1. Prepare corrected income statements for the thrce years. tate whether each year's net income--before your corrections-is understated overstated, and indicate the amount of the understatement or overstatement. 3. Compute the inventory turnover and days' sales in inventory using the corrected income statements for the three years. (Round all numbers to two decimals.) P6A-32A Accounting for inventory using the periodic inventory system- FIFO, LIFO, and weighted-average, and comparing FIFO, LIFO and weighted-average Futuristic Electronic Center began October with 65 units of merchandise inventory that cost $82 each. During October, the store made the following purchases: Oct. 3 12 18 25 units@$90 each 30 units@$ 90 each 35 units@$ 96 each Futuristic uses the periodic inventory system, and the physical count at October 31 indicates that 80 units of merchandise inventory are on hand. Requirements 1. Determine the ending merchandise inventory and cost of goods sold amounts for the October financial statements using the FIFO, LIFO, and weighted-average inventory costing methods 2. Net sales revenue for October totaled $28,000. Compute Futuristic's gross profit for October using each method. Which method will result in the lowest income taxes for Futuristic? Why? Which method will result in the highest net income for Futuristic? Why? 3. roblems Group B r all problems, 5-33B Accounting for inventory using the p assume the perpetual inventory system is used unless stated otherwise. ernctual inen

Answer 1

When perfodic system is used for invensoies valustion, inventories account is no updated on every saile and parchase like in perpetual syitcm. The alocion of laventories under this system is carried on at the end of the period. Under the periodical inventory system FIFO, LIFO and average cost methods are used for invenoy valuadion like in perpetual system FIFO staed for First-in, First-ot Und๙ FIFO method, the goods diapan in the order in which the goods are purchased hence costs are included in the cost of merchandise sold in the order in which they were incurred, Further ending inventory will consist the mos recent cost Physical ventories at October 31 shaws hat 80 units are on hand The cost of 80 units in ending inventories on october 31 is deiermined as folows: 009 RateAmount Units purchase on Ortober 18 ts purchase on sober 12 35 $2.700 $1.350 on Oaober 3 LIFO stand for Last-in, Finst-ut When LIFO Method ud, the cost of the unit sok is the cost of the most ecent purchase Further ending invฮmory will consist the mos: earliest cost of purchase. The oast of 80 units in ending inventories an October 31 is determined as follows: Q x Rate) 5330 $1,350 s punchase on October3 (Halnce unia) 15 9340 AVERAGE COSTMETHOD Under this method weighted average co unit oot ssed in determine the oost of merchandise invemories at the end of periad in the given problem, the total gty available for sale is 155 Unit and the total cost is S13,640 the weighted avcrage cost will be: Totalcost Total unis available forsale STC$88.00 15SUNIT Invetories cost as on October 31 will be 80 Usitx$8800-57,040 COST OF GOODS SOLD UNDER TIRKE METHOD WILL BBAS UNDER SS: ENDNG INVENTORY COST CALAULATION OF GROSS PROSTr UNDER THREEMEETHOD S:COST O LIFO method will result in the lowest income tax becaee gross proit in LIFO method is less than other tao method HIFO msthed will result in the higest net income because groes profit in FIFO method is greater than other two method