Problem 6-4A (Part Level Submission) The management of Metlock, Inc. is reevalua

Question

Problem 6-4A (Part Level Submission) The management of Metlock, Inc. is reevaluating the appropriateness of using its present inventory cost flow method, which is average- cost. The company requests your help in determining the results of operations for 20191f ether the FIFO or the uro rnethod had beer used. For 2019, the accounting records show these data: $1,120,500 727,500 (10,500 units) $21,000 Beginning Ending (25,500 units) Total net sales (270,000 units) Total cost of goods purchased (285,000 units) Purchases were made quarterly as follows. Quarter Units Unit Cost Total Cost $2.30 $172,500 2.45 147,000 2.60 156,000 252,000 $727,500 75,000 2 60,000 60,000 490,000.052000 285,000 Operating expenses were $130,000, and the company's income tax rate is 40% to search

Explanation / Answer

Ending Inventory under FIFO From last purchases (25500 units @ 2.80): $71400 Ending Inventory underr LIFO Beginning balance (10500 units) 21000 Purchase of 1st quarter (15000 units @ 2.30) 34500 Ending Inventory underr LIFO 45500 COGS: FIFO LIFO Beginning Inventory 21000 21000 Add: Purchases 727500 727500 Less: Ending inventory -71400 -45500 COGS 677100 703000 CONDENSED INCOME STATEMENT FIFO LIFO Sales revenue 1120500 1120500 Less: COGS Beginning inventory 21000 2100 Add: Total purchase 727500 727500 Total goods available for sale 748500 748500 Less: Ending inventory 71400 45500 COGS 677100 703000 Gross Margin 443400 417500 Less Operating expnse 130000 130000 Net Income before tax 313400 287500 Less: Tax @ 40% 125360 115000 Net Income after tax 188040 172500

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