5-4A Effect of inventory cost flow ( FIFO, LIFO and weighted average) on gross margin
The following information pertains to Porter Company for 2011.
Beginning Inventory 70 units @ $13
Units Purchased 280 units @ $18
Ending inventory consisted of 30 units. Porter sold 320 units at $30 each. All purchases and sales were made with cash.
A. Compute the gross margin for Porter Company using the following cost flow assumptions:
B. What is the dollar amount of difference in net income between using FIFO versus LIFO? (Ignore income tax considerations.)
C. Determine the cash flow from operating activities, using each of the three cost flow assumptions listed in Requirement A. Ignore the effect of income taxes. Explain why these cash flows have no differences.