Units purchased consisted of 35,000 units at $4.21 on Ntarcn z.,,, ,” Selling price Operating expenses July 24; and 5,000 units at $4.83 on Decernber 12. Income taxes are 30%. (a) prepare comparative condensed income statements for 2014 under FIFO , income) wi, 4_1N. Instructions di ,0 . (b) 400•1•”‘ Answer the following questions for management in the form of a bus. (3) Which inventory cost flow method is most likely to approximate the Y? (2) Which inventor), cost flow method produces the most meaningful net * (1) Which inventory cost flow method produces the most meaningful invent — ‘etter. (Show computations of ending inventor i.) amount for the balance sheet? Why? Inc_ sett with the actual (4) How much more cash will be available under LIFO than under FIFO? Why. physical flow of the goods? Why? (5) How much of the gross profit under FIFO is illusionary in comparison • ? gross proIFO? P6 5B You have the following inform under L ormation for Cry stal Inc. for the mo nth ended May 31 , 2014. Crystal uses a periodic method for inventory. Unit Cost or Beginning inventory Price Description 20 Units Selling Purchase 40 Sale 110 23 Sale 70 90 32 40 Purchase 25 Purchase 60 37 26 Sale 80 38
Date May 1 May 6 May 7 May 15 May 18 May 24 May 30
Instructions (a) Calculate (i) ending inventory, (ii) cost of goods sold, (iii) gross profit, and (iv) gross profit rate under each of the following methods. (1) LIFO. (2) FIFO. (3) Average cost. (Round cost per unit to three decimal places.) (b) Compare results for the three cost flow assumptions. P6 6B You have the following information for Limex Watches. Limex uses the periodi method of accounting for its inventory transactions. Limex carries only one brand ( hand crafted jeweled watches—all are identical. Each batch of watches purchased is car’ fully coded and marked with its purchase cost.
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