Income comparisons and cost flows—periodic LO3 LO4 QP Corp. sold 6,500 units of its pro...

Income comparisons and cost flows—periodic LO3 LO4

QP Corp. sold 6,500 units of its product at $50 per unit in year 2010 and incurred operating expenses of

$5 per unit in selling the units. It began the year with 700 units in inventory and made successive purchases

of its product as follows.

Required

1. Prepare comparative income statements similar to Exhibit 17.8 for the three inventory costing methods

of FIFO, LIFO, and weighted average. Include 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

per unit costs to three decimals, but inventory balances to the dollar.)

2. How would the financial results from using the three alternative inventory costing methods change

if QP had been experiencing declining costs in its purchases of inventory?

3. What advantages and disadvantages are offered by using (a) LIFO and (b) FIFO? Assume the continuing

trend of increasing costs.

Check (1) Net income:

LIFO, $109,760; FIFO,

$111,440; WA, $110,866