The management of Gresa 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 2020 if either the FIFO or the LIFO method had been used. For 2020, the accounting records show these data: Purchases and Sales Beginning ( 7,000 units) $ 14,000 Total net sales ( 180,000 units) $ 747,000 Ending ( 17,000 units) Total cost of goods purchased ( 190,000 units) 466,000 Purchases were made quarterly as follows. Quarter Units Unit Cost Total Cost 1 50,000 $ 2.2 $ 110,000 2 40,000 2.35 94,000 3 40,000 2.5 100,000 4 60,000 2.7 162,000 190,000 $ 466,000 Operating expenses were $ 130,000, and the company’s income tax rate is 40%. Prepare comparative condensed income statements for 2020 under FIFO and LIFO
The management of Gresa 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 2020 if either the FIFO or the LIFO method had been used. For 2020, the accounting records show these data: Purchases and Sales Beginning ( 7,000 units) $ 14,000 Total net sales ( 180,000 units) $ 747,000 Ending ( 17,000 units) Total cost of goods purchased ( 190,000 units) 466,000 Purchases were made quarterly as follows. Quarter Units Unit Cost Total Cost 1 50,000 $ 2.2 $ 110,000 2 40,000 2.35 94,000 3 40,000 2.5 100,000 4 60,000 2.7 162,000 190,000 $ 466,000 Operating expenses were $ 130,000, and the company’s income tax rate is 40%. Prepare comparative condensed income statements for 2020 under FIFO and LIFO
Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter7: Inventories
Section: Chapter Questions
Problem 5PA
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The management of Gresa 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 2020 if either the FIFO or the LIFO method had been used. For 2020, the accounting records show these data:
|
Purchases and Sales
|
||||||
| Beginning ( 7,000 units) | $ 14,000 | Total net sales ( 180,000 units) | $ 747,000 | |||
| Ending ( 17,000 units) | Total cost of goods purchased ( 190,000 units) | 466,000 |
Purchases were made quarterly as follows.
|
Quarter
|
Units
|
Unit Cost
|
Total Cost
|
|||
| 1 |
50,000
|
$ 2.2 |
$ 110,000
|
|||
| 2 |
40,000
|
2.35 |
94,000
|
|||
| 3 |
40,000
|
2.5 |
100,000
|
|||
| 4 |
60,000
|
2.7 |
162,000
|
|||
|
190,000
|
$ 466,000
|
Operating expenses were $ 130,000, and the company’s income tax rate is 40%.
Prepare comparative condensed income statements for 2020 under FIFO and LIFO
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