Effects of Different Cost Flow Assumptions Gable, Inc., is a provider of home furnishings. The company...
Effects of Different Cost Flow Assumptions
Gable, Inc., is a provider of home furnishings. The company uses the FIFO inventory method. The following information was taken from the company’s recent financial statements (dollar amounts are in thousands):
Page 369
The financial statements also revealed that had Gable been using LIFO, its cost of goods sold would have been $1,865,000. The company’s income taxes and payments amount to approximately 40 percent of income before taxes.
a.Explain how LIFO can result in a higher cost of goods sold. Would you expect LIFO to result in a greater or lesser valuation of the company’s ending inventories? Defend your answer.
b.Assuming that Lollar had been using LIFO, compute the following amounts for the current year. Show your supporting computations, with dollar amounts in thousands.
1. Income before taxes
2. Income taxes expense (which are assumed equal to income taxes actually paid)
3. Net income
4. Net cash provided by operating activities
Homework Answers
Add Answer to:
Effects of Different Cost Flow
Assumptions
Gable, Inc., is a provider of home
furnishings. The company...
Problem 6-04A a The management of Metlock, Inc. asks your help in determining the comparative effects...
Problem 6-04A a
The management of Metlock, Inc. asks your help in determining
the comparative effects of the FIFO and LIFO inventory cost flow
methods. For 2022, the accounting records show these data.
Inventory, January 1 (14,500 units)
$ 58,000
Cost of 125,000 units purchased
550,600
Selling price of 98,000 units sold
750,000
Operating expenses
128,000
Units purchased consisted of 36,000 units at $4.20 on May 10;
63,000 units at $4.40 on August 15; and 26,000 units at $4.70 on...
Cambi Company began operations on January 1, 2016. In the second quarter of 2017, it adopted...
Cambi Company began operations on January 1, 2016. In the second quarter of 2017, it adopted the FIFO method of inventory valuation. In the past, it used the LIFO method. The company’s interim income statements as originally reported under the LIFO method follow: 2016 2017 1stQ 2ndQ 3rdQ 4thQ 1stQ Sales $ 22,000 $ 24,000 $ 26,000 $ 28,000 $ 30,000 Cost of goods sold (LIFO) 5,200 6,200 7,000 8,200 9,700 Operating expenses 3,200 3,400 3,800 4,200 4,400 Income before...
Problem 8-7 The management of Indigo Company has asked its accounting department to describe the effect...
Problem 8-7
The management of Indigo Company has asked its accounting
department to describe the effect upon the company’s financial
position and its income statements of accounting for inventories on
the LIFO rather than the FIFO basis during 2017 and 2018. The
accounting department is to assume that the change to LIFO would
have been effective on January 1, 2017, and that the initial LIFO
base would have been the inventory value on December 31, 2016. The
following are the...
The management of Windsor, Inc. asks your help in determining the comparative effects of the FIFO...
The management of Windsor, Inc. asks your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods. For 2022, the accounting records show these data. Inventory, January 1 (11,500 units) $ 40,250 Cost of 119,000 units purchased 464,300 Selling price of 95,000 units sold 727,000 Operating expenses 130,000 Units purchased consisted of 32,000 units at $3.70 on May 10; 65,000 units at $3.90 on August 15; and 22,000 units at $4.20 on November 20. Income...
Wolfgang Kitchens has always used the FIFO inventory costing method for both financial reporting and tax...
Wolfgang Kitchens has always used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2021, Wolfgang decided to change to the LIFO method. Net income in 2021 was correctly stated as $92 million. If the company had used LIFO in 2020, its cost of goods sold would have been higher by $8 million that year. Company accountants are able to determine that the cumulative net income for all years prior to 2020 would...
Wolfgang Kitchens has always used the FIFO inventory costing method for both financial reporting and tax...
Wolfgang Kitchens has always used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2018, Wolfgang decided to change to the LIFO method. Net income in 2018 was correctly stated as $106 million. If the company had used LIFO in 2017, its cost of goods sold would have been higher by $15 million that year. Company accountants are able to determine that the cumulative net income for all years prior to 2017 would...
The management of Novak Company has asked its accounting department to describe the effect upon the...
The management of Novak Company has asked its accounting department to describe the effect upon the company’s financial position and its income statements of accounting for inventories on the LIFO rather than the FIFO basis during 2020 and 2021. The accounting department is to assume that the change to LIFO would have been effective on January 1, 2020, and that the initial LIFO base would have been the inventory value on December 31, 2019. The following are the company’s financial...
Mannisto Inc. uses the FIFO inventory cost flow assumption. In a year of rising costs and...
Mannisto Inc. uses the FIFO inventory cost flow assumption. In a year of rising costs and prices, the firm reported net income of $217,775 and average assets of $1,463,010. If Mannisto had used the LIFO cost flow assumption in the same year, its cost of goods sold would have been $39,290 more than under FIFO, and its average assets would have been $42,760 less than under FIFO. Required: a. Calculate the firm's ROI under each cost flow assumption (FIFO and...
Mannisto Inc. uses the FIFO inventory cost flow assumption. In a year of rising costs and...
Mannisto Inc. uses the FIFO inventory cost flow assumption. In a year of rising costs and prices, the firm reported net income of $235,546 and average assets of $1,496,540. If Mannisto had used the LIFO cost flow assumption in the same year, its cost of goods sold would have been $48,370 more than under FIFO, and its average assets would have been $40,460 less than under FIFO. Required: a. Calculate the firm's ROI under each cost flow assumption (FIFO and...
Mannisto Inc. uses the FIFO inventory cost flow assumption. In a year of rising costs and...
Mannisto Inc. uses the FIFO inventory cost flow assumption. In a year of rising costs and prices, the firm reported net income of $227,936 and average assets of $1,410,000. If Mannisto had used the LIFO cost flow assumption in the same year, its cost of goods sold would have been $43,260 more than under FIFO, and its average assets would have been $43,930 less than under FIFO. Required: a. Calculate the firm's ROI under each cost flow assumption (FIFO and...
Problem 6-04A a
The management of Metlock, Inc. asks your help in determining
the comparative effects of the FIFO and LIFO inventory cost flow
methods. For 2022, the accounting records show these data.
Inventory, January 1 (14,500 units)
$ 58,000
Cost of 125,000 units purchased
550,600
Selling price of 98,000 units sold
750,000
Operating expenses
128,000
Units purchased consisted of 36,000 units at $4.20 on May 10;
63,000 units at $4.40 on August 15; and 26,000 units at $4.70 on...
Problem 8-7
The management of Indigo Company has asked its accounting
department to describe the effect upon the company’s financial
position and its income statements of accounting for inventories on
the LIFO rather than the FIFO basis during 2017 and 2018. The
accounting department is to assume that the change to LIFO would
have been effective on January 1, 2017, and that the initial LIFO
base would have been the inventory value on December 31, 2016. The
following are the...
The management of Windsor, Inc. asks your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods. For 2022, the accounting records show these data. Inventory, January 1 (11,500 units) $ 40,250 Cost of 119,000 units purchased 464,300 Selling price of 95,000 units sold 727,000 Operating expenses 130,000 Units purchased consisted of 32,000 units at $3.70 on May 10; 65,000 units at $3.90 on August 15; and 22,000 units at $4.20 on November 20. Income...
Mannisto Inc. uses the FIFO inventory cost flow assumption. In a year of rising costs and prices, the firm reported net income of $217,775 and average assets of $1,463,010. If Mannisto had used the LIFO cost flow assumption in the same year, its cost of goods sold would have been $39,290 more than under FIFO, and its average assets would have been $42,760 less than under FIFO. Required: a. Calculate the firm's ROI under each cost flow assumption (FIFO and...
Mannisto Inc. uses the FIFO inventory cost flow assumption. In a year of rising costs and prices, the firm reported net income of $235,546 and average assets of $1,496,540. If Mannisto had used the LIFO cost flow assumption in the same year, its cost of goods sold would have been $48,370 more than under FIFO, and its average assets would have been $40,460 less than under FIFO. Required: a. Calculate the firm's ROI under each cost flow assumption (FIFO and...
Mannisto Inc. uses the FIFO inventory cost flow assumption. In a year of rising costs and prices, the firm reported net income of $227,936 and average assets of $1,410,000. If Mannisto had used the LIFO cost flow assumption in the same year, its cost of goods sold would have been $43,260 more than under FIFO, and its average assets would have been $43,930 less than under FIFO. Required: a. Calculate the firm's ROI under each cost flow assumption (FIFO and...
Most questions answered within 3 hours.
-
A 1400Kg sports car accelerates from rest to 90km/h in 7.0s.
What is the average power...
asked 25 minutes ago -
For the following reaction, 0.128 moles of
potassium hydrogen sulfateare mixed with
0.504 moles of potassium...
asked 3 hours ago -
1. What is the present value of $400, three years in the future
if the interest...
asked 4 hours ago -
The labor force minus the number of employed equals the number
of unemployed.
a. True
b....
asked 6 hours ago -
Determine the mass in units of grams [g] of 0.49 moles [mol]
of a new fictitious...
asked 6 hours ago -
A horizontal mass of M=5kg is on a spring and stretched to
x=0.5m when released from...
asked 8 hours ago -
26 of 50
"I have worked at the Arizona Humane Society for ten years, and
have...
asked 8 hours ago -
Compare and contrast zero based budgeting and incremental (or
base year) budgeting.
asked 8 hours ago -
4 pts 10. Which of the following hypothesis would be MOST
difficult to test experimentally? Group...
asked 8 hours ago -
A business owner makes 1,000 items a day. Each day he or she
contributes eight hours...
asked 8 hours ago -
A
circular loop in the plane of a paper lies inca0.65 T magnetic
field pointing into...
asked 8 hours ago -
A business owner is trying to decide whether to buy, rent, or
lease office space and...
asked 8 hours ago