Question

25th Century Electronic Center began December with 70 units of merchandise inventory that cost $74 each. During December, the store made the following purchases: E: (Click the icon to view the purchases.) 25th Century uses the periodic inventory system, and the physical count at December 31 indicates that 80 units of merchandise inventory are on hand. Read the requirements. Requirement 1. Determine the ending merchandise inventory and cost of goods sold amounts for the December financial statements using the FIFO, LIFO, and weighted average inventory costing methods. FIFO LIFO Weighted average Data Table Ending inventory Cost of goods sold Requirement 2. Sales revenue for December totaled $29,000. Compute 25th Century's gross profit for December using each method. Dec. FIFO Cost LIFO Cost Weighted-average 3 12 18 20 30 40 units @ $ units @ $ units @ $ 76 each 78 each 94 each Gross profit Requirement 3. Which method will result in the lowest income taxes for 25th Century? Why? Which method will result in the highest net income for 25th Century? Why? The method will result in the lowest income taxes because under this method, company's gross profit is the Print Done Which method will result in the highest net income for 25th Century? Why? The method will result in the highest net income because under this method, company's gross profit is the

Answer 1

Correct Answer:

Requirement 1:

	FIFO	LIFO	Weighted Average
Ending Inventory	$                 6,860.000	$                5,940.000	$                 6,400.000
Cost of Goods Sold	$                 5,940.000	$                6,860.000	$                 6,400.000

Requirement 2:

		FIFO	LIFO	Weighted Average
A	Sales Revenue	$                   29,000.00	$ 29,000.00	$        29,000.00
B	Cost of goods sold	$                     5,940.00	$     6,860.00	$          6,400.00
C =A-B	Gross profit	$                   23,060.00	$ 22,140.00	$        22,600.00

Requirement 3:

LIFO method will result in the lowest income taxes because under this method, company’s gross profit is lowest

FIFO method will result in the highest income taxes because under this method, company’s gross profit is highest

Working:

Cost of Goods Available for sale
		Units	Cost per unit	value
Beginning Inventory		70	$                         74.00	$                   5,180.00
Purchases
03-Dec		20	$                         76.00	$                   1,520.00
12-Dec		30	$                         78.00	$                   2,340.00
18-Dec		40	$                         94.00	$                   3,760.00
Total		160		$                 12,800.00

	FIFO
A	Total Units Available for sale			160		$          12,800.00
	Units Sold			80
	Ending Inventory Units			80
	Valuation
	Cost of Goods Sold		70		$                         74.00	$            5,180.00
			10		$                         76.00	$                760.00
B	Cost of Goods Sold		80	units		$           5,940.00
A-B	Ending Inventory		80	units		$            6,860.00

	LIFO
A	Total Units Available for sale			160		$          12,800.00
	Units Sold			80
	Ending Inventory Units			80
	Valuation
	Cost of Goods Sold		40.00		$                         94.00	3,760.00
			30.00		$                         78.00	2,340.00
			10.00		$                         76.00	760.00
B	Cost of Goods Sold		80.00	units		$            6,860.00
A-B	Ending Inventory		80	units		$            5,940.00

Weighted Average Cost Per unit
Units		(A)	160
Total Cost		(B)	$                12,800.00
Average Cost		(C=B/A)	$                         80.00

	Weighted Average
A	Total Units Available for sale			160		$          12,800.00
	Units Sold			80
	Ending Inventory Units			80
	Valuation
	Cost of Goods Sold					$                         -
			80		$                         80.00	$            6,400.00
						$                         -
B	Cost of Goods Sold		80	units		$            6,400.00
A-B	Ending Inventory		80	units		$            6,400.00

End of answer.

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