Scoresby Inc. tracks the number of units purchased and sold throughout each year but applies its inventory costing method at the end of the year as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.
Transactions
Units
Unit Cost
a. Inventory, Beginning
1,500
$
28
For the year:
b. Purchase, March 5
7,500
29
c. Purchase, September 19
3,500
31
d. Sale, April 15 (sold for $73 per unit)
2,200
e. Sale, October 31 (sold for $76 per unit)
6,500
f. Operating expenses (excluding income tax expense), $398,000
Prepare an income statement that shows the FIFO method.
|
Scoresby Inc. tracks the number of units purchased and sold throughout each year but applies its inventory costing method at the end of the year as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31. |
| Transactions | Units | Unit Cost | ||||
| a. Inventory, Beginning | 1,500 | $ | 28 | |||
| For the year: | ||||||
| b. Purchase, March 5 | 7,500 | 29 | ||||
| c. Purchase, September 19 | 3,500 | 31 | ||||
| d. Sale, April 15 (sold for $73 per unit) | 2,200 | |||||
| e. Sale, October 31 (sold for $76 per unit) | 6,500 | |||||
| f. Operating expenses (excluding income tax expense), $398,000 | ||||||
Prepare an income statement that shows the FIFO method.
Related questions
E7-6 Analyzing and Interpreting the Financial Statement Effects of Periodic FIFO, LIFO, and Weighted Average Cost [LO 7-3]
| Orion Iron Corp. tracks the number of units purchased and sold throughout each year but applies its inventory costing method at the end of the year, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31. |
| Transactions | Units | Unit Cost | ||||
| a. Inventory, Beginning | 350 | $ | 14 | |||
| For the year: | ||||||
| b. Purchase, April 11 | 950 | 12 | ||||
| c. Purchase, June 1 | 700 | 15 | ||||
| d. Sale, May 1 (sold for $42 per unit) | 350 | |||||
| e. Sale, July 3 (sold for $42 per unit) | 610 | |||||
| f. Operating expenses (excluding income tax expense), $18,000 | ||||||
| Required: |
| 1. | Calculate the number and cost of goods available for sale. |
| 2. | Calculate the number of units in ending inventory. |
| 3. | Compute the cost of ending inventory and cost of goods sold under (a) FIFO, (b) LIFO, and (c) weighted average cost. (Do not round intermediate calculations. Round your final answers to the nearest dollar amount.) |
| 4. | Prepare an Income Statement that shows the FIFO method, LIFO method and weighted average method. |
| 6. | Which inventory costing method minimizes income taxes? | ||||||
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PA7-1 Analyzing the Effects of Four Alternative Inventory Methods in a Periodic Inventory System [LO 7-3]
| Gladstone Company tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31. |
| Transactions | Units | Unit Cost | |||||||
| Beginning inventory, January 1 | 1,600 | $ | 45 | ||||||
| Transactions during the year: | |||||||||
| a. | Purchase, January 30 | 2,300 | 49 | ||||||
| b. | Sale, March 14 ($100 each) | (1,250 | ) | ||||||
| c. | Purchase, May 1 | 1,000 | 75 | ||||||
| d. | Sale, August 31 ($100 each) | (1,500 | ) | ||||||
| Assuming that for Specific identification method (item 1d) the March 14 sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of January 30. Assume that the sale of August 31 was selected from the remainder of the beginning inventory, with the balance from the purchase of May 1. |
| Required: | |
| 1. | Compute the amount of goods available for sale, ending inventory, and cost of goods sold at December 31 under each of the following inventory costing methods: (Round intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.) |
| 2-a. | Of the four methods, which will result in the highest gross profit? | ||||||||
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| 2-b. | Of the four methods, which will result in the lowest income taxes? | ||||||||
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