Applying and Analyzing Inventory Costing Methods At the beginning of the current period, Chen carried 1,000 units of its product with a unit cost of $10. A summary of purchases during the current period follows. During the period, Chen sold 2,800 units. Units Unit Cost Cost $ 10 $10,000 Beginning Inventory 1,000 Purchase #1 1,800 800 1,200 Purchase #2 Purchase #3 (a) Assume that Chen uses the first-in, first-out method. Compute both cost of good sold for the current period and the ending inventory balance. Use the financial statement effects template to record cost of go Ending inventory balance $ Cost of goods sold Use negative signs with answers, when appropriate. $ Transaction Record FIFO cost of goods sold 11 19,800 13 10,400 15 18,000 Cash Asset + $ Balance Sheet Earned Noncash Contributed Assets - Liabilities + Capital + Capital Income Statement (b) Assume that Chen uses the last-in, first-out method. Compute both cost of good sold for the current period and the ending inventory balance. Ending inventory balance s Cost of goods sold Net Revenue - Expenses Income (d) Which of these three inventory costing methods would you choose to: 1. Reflect what is probably the physical flow of goods? OLIFO OFIFO OAverage Cost OLIFO OFIFO OAverage Cost 2. Minimize income taxes for the period? 3. Report the largest amount of income for the period? OLIFO OFIFO OAverage Cost (c) Assume that Chen uses the average cost method. Compute both cost of good sold for the current period and the ending inventory balance. (HINT: Do not round average cost per unit for calculations.) Ending inventory balance $ Cost of goods sold
Applying and Analyzing Inventory Costing Methods At the beginning of the current period, Chen carried 1,000 units of its product with a unit cost of $10. A summary of purchases during the current period follows. During the period, Chen sold 2,800 units. Units Unit Cost Cost $ 10 $10,000 Beginning Inventory 1,000 Purchase #1 1,800 800 1,200 Purchase #2 Purchase #3 (a) Assume that Chen uses the first-in, first-out method. Compute both cost of good sold for the current period and the ending inventory balance. Use the financial statement effects template to record cost of go Ending inventory balance $ Cost of goods sold Use negative signs with answers, when appropriate. $ Transaction Record FIFO cost of goods sold 11 19,800 13 10,400 15 18,000 Cash Asset + $ Balance Sheet Earned Noncash Contributed Assets - Liabilities + Capital + Capital Income Statement (b) Assume that Chen uses the last-in, first-out method. Compute both cost of good sold for the current period and the ending inventory balance. Ending inventory balance s Cost of goods sold Net Revenue - Expenses Income (d) Which of these three inventory costing methods would you choose to: 1. Reflect what is probably the physical flow of goods? OLIFO OFIFO OAverage Cost OLIFO OFIFO OAverage Cost 2. Minimize income taxes for the period? 3. Report the largest amount of income for the period? OLIFO OFIFO OAverage Cost (c) Assume that Chen uses the average cost method. Compute both cost of good sold for the current period and the ending inventory balance. (HINT: Do not round average cost per unit for calculations.) Ending inventory balance $ Cost of goods sold
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter5: Inventories And Cost Of Goods Sold
Section: Chapter Questions
Problem 5.10AMCP
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Please explaim part B) and c? how Ending imventory balance calculated for both part of questions
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