Intermediate Accounting, 17th Edition
17th Edition
ISBN: 9781119503682
Author: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
Publisher: WILEY
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Required:
Answer the following independent questions and show all computations supporting your answers.
a) Assume that the company uses the FIFO method. The value of the ending inventory atDecember 31 is $__________. b) Assume that the company uses the LIFO method. The value of the ending inventory onDecember 31 is $__________.c) Determine the difference in the amount of income that the company would have reported if ithad used the FIFO method instead of the LIFO method. Would income have been greater orless? Which method would provide more tax advantage? -Explain your rationale.
Required:a. Complete a subsidiary ledger record for the computer using each of the three inventory valuation methods listed below
1. Average cost.2. FIFO.3. LIFO.
Your inventory records should show both purchases of this product, the sale on Mar 31, and the balance on hand on Mar 31, 2020.
b. Which of the three cost flow assumptions will result in reporting the lowest net income for the current year? Explain
When an entity prepares financial statements in a current cost basis, how is the cost of goods sold computed?
a. Number of units sold times average current cost
b. Number of units sold times current cost at year-end
c. Number of units sold times beginning current cost
d. Beginning inventory at current cost plus cost of goods purchased less ending inventory at current cost
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- Various inventory methods including FIFO, LIFO, and average cost provide a process to identify raw materials, work-in-process, and finished goods. Discuss the benefits of using one method verses the other and their effect on the income statement. Does a company decide, based on taxes, which method to use or are there other determinants that are more important in your opinion? Provide details explaining your opinion in your discussion.arrow_forwardIn comparing the accounts of a merchandising company with those of a service company, what additional accounts would the merchandising company likely use, assuming it employs a perpetual inventory system? Which financial statements would these accounts appear on?arrow_forwardThe ABC sole proprietorship deals with the trade of IT items and the provision of related services. Carry out the adjustment entries of the accounts for the fiscal year 20X6 as well as those for the determination of the gross profit taking into account the following information: For the accounting of inventories, the company applies a periodic inventory and evaluates the inventories using the weighted average cost method. The company trades the kind P. The initial inventory consists of 20 units with a purchase price of € 50 per unit. In the fiscal year, 20X6 bought 80 units for € 55 per unit and 80 units for € 60 per unit. In the inventory of 31/12/20X6, the stocks in the warehouse consist of 30 units whose liquidation price amounts to € 55 per unit. Total gross merchandise sales amounted to €45,000 and sales returns to €400. During the 20x6 fiscal year, the company had purchased $1,000 at a $200 exchange rate= € 1. On 31/12/20X6, the current USD exchange rate is $1 =€ 1.2. The…arrow_forward
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