Daniel Company uses a periodic inventory system. Data for the current year: beginning merchandise inventory (ending inventory December 31, prior year), 2,040 units at $37; purchases, 7,900 units at $39; expenses (excluding income taxes), $192,900; ending inventory per physical count at December 31, current year, 1,610 units; sales, 8,330 units; sales price per unit, $78; and average income tax rate, 30 percent. Required: 1-a. Compute cost of goods sold under the FIFO, LIFO, and average cost inventory costing methods. 1-b. Prepare income statements under the FIFO, LIFO, and average cost inventory costing methods. 2. Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow)? 3. Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow), assuming that prices were falling?
Daniel Company uses a periodic inventory system. Data for the current year: beginning merchandise inventory (ending inventory December 31, prior year), 2,040 units at $37; purchases, 7,900 units at $39; expenses (excluding income taxes), $192,900; ending inventory per physical count at December 31, current year, 1,610 units; sales, 8,330 units; sales price per unit, $78; and average income tax rate, 30 percent. Required: 1-a. Compute cost of goods sold under the FIFO, LIFO, and average cost inventory costing methods. 1-b. Prepare income statements under the FIFO, LIFO, and average cost inventory costing methods. 2. Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow)? 3. Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow), assuming that prices were falling?
College Accounting, Chapters 1-27
23rd Edition
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:HEINTZ, James A.
Chapter13: Accounting For Merchandise Inventory
Section: Chapter Questions
Problem 1MP: Hurst Companys beginning inventory and purchases during the fiscal year ended December 31, 20-2,...
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