Question

E7-8 Evaluating the Effects of Inventory Methods on Income from Operations, Income Taxes, and Net Income (Periodic) [LO 7-3) Courtney Company uses a periodic inventory system. The following data were available: beginning inventory, 1,500 units at $25; purchases, 3,000 units at $28; operating expenses (excluding income taxes), S94,000; ending inventory per physical count at December 31, 1,000 units; sales price per unit, $75; 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.) Inventory Costing Method Weighted FIFO LIFO Average Income Statement Units Sales Revenue Cost of Goods Soldº Gross Profit Operating Expenses Income from Operations Income Tax Expense Net Income Units FIFO LIFO Weighted Average *Cost of Goods Sold Equation: Beginning Inventory Purchases Goods Available for Sale Ending Inventory Cost of Goods Sold

Answer 1

When perlodie systemm is used foe inventorics valuation, inventorics account is not updated on every sale and purchase like in under this system is carried on at the end of the period. Under the periodical imventory system FIFO, LIFO and average cost methods are used for inventory valuation like in perpetual system perpetual system. The valuation of FIFO stand for Firstin, First-out Under FIFO method, the goods dispose in the onder in which the goeds are purchased, hence costs are included in the cost of merchandise sold in the order in which they were incured. Further ending inventory will consist the most reeent cost Physical inventories at December 31 shows that 1,000 units are on hand. The cost of 1,000 units in ending inventories on December 31 is determined as followw ot Rate Oty s Rate 28000 528,000 S28 otal LIFO stand for Last-in, First-ut. When LIFO Method used, the cost of the unit sold is the cost of the most reoent purchase Further ending inventory will consist the most carliost cost of purchase The cost of 1,000 units in ending inventories on December 31 is determined as follows Qty Rate AVERAGE COST METHOD Under this method weighted average cost unis cost used in determine the cost of merchandise inventories at the end of period. in the given problem, the total qty available for sale is 4,500 Unit and the total cost is $121,300 The weiphted average cost will be Total cot Total unis avaiabk ke sake $121500 4,500 UNIT-52700 000 Unit x52700 ost as on December 31 wall be Inventories c