Question 4 (20 marks) The manager asks your help in determining the comparative...
50.1K
Verified Solution
Link Copied!
Question
Accounting
Question 4 (20 marks)
The manager asks your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods. For 2020, the accounting records provide the following data
Inventory, January 1 (10,000 units) $ 47,000
Cost of 100,000 units purchased 532,000
Selling price of 84,000 units sold 735,000
Operating expenses 140,000
Units purchased consisted of 35,000 units at $5.10 on May 10;
35,000 units at $5.30 on August 15; and 30,000 units at $5.60 on November 20.
Income taxes are 30%.
Required
(a) Prepare comparative condensed income statements for 2020 under FIFO and LIFO. (12 marks)
(b) Answer the following questions for management.
(1) Which inventory cost flow method produces the most meaningful inventory amount for the balance sheet? Why? (2 marks)
(2) Which inventory cost flow method produces the most meaningful net income? Why? (2 marks)
(3) Which inventory cost flow method is most likely to approximate actual physical flow of the goods? Why? (2 marks) (4) How much additional cash will be available for management under LIFO than under FIFO? Why? (2 marks)
Question 4 (20 marks)
The manager asks your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods. For 2020, the accounting records provide the following data
Inventory, January 1 (10,000 units) $ 47,000
Cost of 100,000 units purchased 532,000
Selling price of 84,000 units sold 735,000
Operating expenses 140,000
Units purchased consisted of 35,000 units at $5.10 on May 10;
35,000 units at $5.30 on August 15; and 30,000 units at $5.60 on November 20.
Income taxes are 30%.
Required
LIFO. (12 marks)
amount for the balance sheet? Why? (2 marks)
Why? (2 marks)
under FIFO? Why? (2 marks)
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
- Unlimited Question Access with detailed Answers
- Zin AI - 3 Million Words
- 10 Dall-E 3 Images
- 20 Plot Generations
- Conversation with Dialogue Memory
- No Ads, Ever!
- Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.