Compare the LCM effect on each amount that was changed in requirement 1. 2. Comp
ID: 2513357 • Letter: C
Question
Compare the LCM effect on each amount that was changed in requirement 1.
2.Compare the LCM effect on each amount that was changed in requirement 1.
PB7-2 Evaluating the Income Statement and Income Tax Effects of Lower of Cost or Market [LO 7-4] Mondetta Clot FIFO inventory costing method, but it failed to apply LCM to the ending inventory. The preliminary income statement follows hing prepared its annual financial statements dated December 31. The company u sed the Net Sales Cost of Goods Sold $416,000 Beginning Inventory Purchases $44,000 271,000 Goods Available for Sale Ending Inventory (FIFO cost) 315,000 59,360 Cost of Goods Sold 255,640 Gross Profit Operating Expenses 160,360 92,000 Income from Operations Income Tax Expense (30%) 68,360 20,508 Net Income $ 47,852Explanation / Answer
CALCULATION OF THE INVENTORY WITH LCM METHOD Item Quantity (A) Cost Market Value LCM (B) Value (A X B) A 2800 $ 4.30 5.80 $ 4.30 $ 12,040 B 1400 $ 5.60 2.80 $ 2.80 $ 3,920 C 6800 $ 2.80 5.80 $ 2.80 $ 19,040 D 2800 $ 7.30 4.30 $ 4.30 $ 12,040 $ 47,040 CALCULATION OF THE NET INCOME Net Sales $ 4,16,000 Cost of goods Sold Beginning inventory $ 44,000 Purchases $ 2,71,000 Goods Available For Sale $ 3,15,000 Ending inventory (LCM) $ 47,040 Cost of goods Sold $ 2,67,960 Gross Profit $ 1,48,040 Operating Expenses $ 92,000 Income from operation $ 56,040 Less: Income tax Expenses 30% $ 16,812 Net income $ 39,228
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