Use the following information to complete this exercise: sales, 550 units for $1

Question

Use the following information to complete this exercise: sales, 550 units for $15,900; beginning inventory, 300 units; purchases, 400 units; ending inventory, 150 units; and operating expenses, $4,200.

Complete the table for each situation. In Situations A and B (costs rising), assume the following: beginning inventory, 300 units at $14 = $4,200; purchases, 400 units at $16 = $6,400. In Situations C and D (costs falling), assume the opposite; that is, beginning inventory, 300 units at $16 = $4,800; purchases, 400 units at $14 = $5,600. Use periodic inventory procedures.

Costs Rising Costs Falling Situation A Situation B Situation C Situation D FIFO LIFO FIFO LIFO $15,900 $15,900 $15,900 Sales Revenue Beginning Inventory Purchases Goods Available for Sale Ending Inventory Cost of Goods Sold Gross Profit Operating Expenses Income from Operations Income Tax Expense (30%) Net Income 15,900 $ 4,200 6,400 10,600 2,400 8,200 7,700 4,200 3,500 1,050 $ 2,450 4,200 4,200 4,200

Explanation / Answer

Solution A b c d Sales 15900 15900 15900 15900 Beginning inventory 4200 4200 4800 4800 purchases 6400 6400 5600 5600 goods for sale 10600 10600 10400 10400 ending inventory 2400 2100 (150*14) 2100 (150*14) 2400 (16*150) COGS 8200 8500 8300 8000 GP 7700 7400 7600 7900 operating bexp 4200 4200 4200 4200 income from operations 3500 3200 3400 3700 ]tax (30) 1050 960 1020 1110 net income 2450 2240 2380 2590 In situation b, as the method if lifo , so in closing stock , stock will be from beginning inventory in situation c, as method is fifo, stock will be left from purchased inventory in situation d, as method is lifo, so in closing stock, stock will be from beginning inventory

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