e Chegg Study | Guided Sox 7 M Midterm #2 ·> C Dezto.mheducation.com/hm.tpx PAWS
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Question
e Chegg Study | Guided Sox 7 M Midterm #2 ·> C Dezto.mheducation.com/hm.tpx PAWS for Students 20. 18.00 points Springer Anderson Gymnastics prepared its annual financial statements dated December 31. The company used the FIFO inventory costing method, but it failed to apply LCM to the ending inventory. The preliminary income statement follows Sales Revenue Cost of Goods Sold $136,000 Beginning Inventory Purchases $14,000 89,000 Goods Available for Sale Ending Inventory (FIFO cost) 103,000 24,150 Cost of Goods Sold 78,850 Gross Profit Operating Expenses 57,150 30,000 Income from Operations 27,150 8,145 Income Tax Expense (30%) Net Income $19,005 Assume that you have been asked to restate the financial statements to incorporate LCM. You have developed the following data relating to the ending inventory: Purchase Cost Item Quantity Per Unit Total Market Value per Unit 2 7:41Explanation / Answer
Answer: 1
In LCM basis, we will choose the lower cost between market value and purchase cost.
Ending inventory is calculated as follows:
Item A:2100*2.80 = 5880
Item B:750*1.80 = 1350
Item c: 3300*0.90 = 2970
Item D:2100*2.80 = 5880
Total cost = 16080
Answer:2
SPRINGER ANDERSON GYMNASTICS Income statement (LCM basis) For the year ended december 31 Sales revenue $ 1,36,000.00 Beginning inventory $ 14,000.00 purchases $ 89,000.00 Goods available for sale $ 1,03,000.00 Ending inventory $ 16,080.00 COGS $ 86,920.00 Gross profit $ 49,080.00 Operating expenses $ 30,000.00 Income from operations $ 19,080.00 Income tax expenses $ 5,724.00 Net income $ 13,356.00Answer:2
Item changed FIFO cost basis LCM basis Amount of increase or (decrease) Ending inventory 24150 16080 -8070 COGS 78850 86920 8070 Gross profit 57150 49080 -8070 Income from operations 27150 19080 -8070 Income tax expense 8145 5724 -2421 Net income 19005 13356 -5649Related Questions
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