E6-15A. (Learning Objective 2: Compare ending inventory and cost of goods sold-F

Question

E6-15A. (Learning Objective 2: Compare ending inventory and cost of goods sold-FIFO vs. LIFO) [no longer online] MusicWorld.net specializes in sound equipment. Because each inventory item is expensive, MusicWorld uses a perpetual inventory system. Company records indicate the following data for a line of speakers: Item Unit Cost Quantity 14 Date Sale Price Jun 1 Ralance Jun 2 Purchase Jun 7Sale Jun 13 Sake $4S 112 112 Requirements . Determine the amounts that MusicWorld should report for cost of goods sold and ending inventory two ways: a. FIFO b. LIFO 2. MusicWorld uses the FIFO method. Prepare MusicWorld's income statement for the month ended June 30, 2014, reporting gross profit. Operating expenses totaled $340, and the income tax rate was 40%

Explanation / Answer

STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL FIFO METHOD RECIEPTS COST OF GOODS SOLD BALANCE DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ 1-Jun 14 45 630 2-Jun 4 69 276 14 45 630 4 69 276 7-Jun 6 45 270 8 45 360 4 69 276 13-Jun 5 45 225 3 45 135 4 69 276 TOTAL 4 276 11 495 7 411 STATEMENT SHOWING INVENTORY RECORD UNDER PERPETUAL LIFO METHOD RECIEPTS COST OF GOODS SOLD BALANCE DATE UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ UNITS RATE AMOUNT $ 1-Jun 14 45 630 2-Jun 4 69 276 14 45 630 4 69 276 7-Jun 4 69 276 2 45 90 12 45 540 13-Jun 5 45 225 7 45 315 TOTAL 4 276 11 591 7 315 COGS Ending Inventory FIFO 495 411 LIFO 591 315 Req 2: Income Statement: Sales revenue (11 units @ 112) 1232 Less: Cost of goods sold 495 Gross Margin 737 Less: Operating expense 340 Net income before tax 397 Less: Tax @ 40% 159 Net Income aftr tax 238

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