Financial Accounting
3rd Edition
ISBN: 9780133791129
Author: Jane L. Reimers
Publisher: Pearson Higher Ed
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Textbook Question
Chapter 5, Problem 51PA
Green Bay Cheese Company is considering changing inventory cost flow method.
Green Bay’s primary objective is to maximize profits. Currently, the firm uses weighted average cost. Data for 2011 are provided.
Operating expenses were $120,000 and the company’s tax rate is 30%.
Requirements
- 1. Prepare the multistep income statement for 2011 using each of the following methods:
- a. FIFO periodic
- b. LIFO periodic
- 2. Which method provides the more current
balance sheet inventory balance at December 31, 2011? Explain your answer. - 3. Which method provides the more current cost of goods sold for the year ended December 31, 2011? Explain your answer.
- 4. Which method provides the better inventory turnover ratio for the year? Explain your answer.
- 5. In order to meet its goal, what is your recommendation to Green Bay Cheese Company? Explain your answer.
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Students have asked these similar questions
The management of Tudor Living asks for your help in determining the comparative
effects of the FIFO and average-cost inventory cost flow methods. For 2020, the
accounting records provide the data shown below.
Units purchased consisted of 40,000 units at £4.00 on May 10; 60,000 units at £4.20 on
August 15; and 20,000 units at £4.45 on November 20. Income taxes are 28%.
Instructions
a.Prepare comparative condensed income statements for 2020 under FIFO and
average cost. (Show computations of ending inventory.)
b.Answer the following questions for management:
1.Which inventory cost flow method produces the more meaningful inventory amount
for the statement of financial position? Why?
2.Which inventory cost flow method is more likely to approximate the actual physical
flow of the goods? Why?
3.How much more cash will be available for management under average-cost thanunder FIFO? Why?
Requirements 1. Prepare the company's January, multistep income statement. Calculate income using the LIFO, average-cost, and FIFO methods. Label the bottom line "Operating income." Round the average cost per unit to three decimal places and all other figures to whole-dollar amounts. Show your computations. 2. Suppose you are the financial vice president of Ohio Instruments. Which inventory method will you use if your motive is to
a. minimize income taxes?
b. report the highest operating income?
c. report operating income between the extremes of FIFO and LIFO?
d. report inventory on the balance sheet at the most current cost? e. attain the best measure of net income for the income statemehi? State the reason for each of your answers.
please answer all please answer all or skip do not waste question or time by giving incomplete or incorrect answer please provide answer with explanation computation formula please answer with steps thanks
Hubble Space Incorporated has the following data which includes inventory conversion period or ICP of the firms against which it benchmarks. The firm's new manager is looking into the company on how he could reduce its inventory enough to reduce its ICP to the benchmarks’ average. If this were done, by how much would inventories decrease? Assume a 365-day year. Cost of goods sold =P85,000; Inventory =P20,000; Inventory conversion period (ICP) =85.88; Benchmark inventory conversion period (ICP) =38.00 *
Chapter 5 Solutions
Financial Accounting
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