1. Explanation Income statement: The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement. First-in-First-Out (FIFO): In First-in-First-Out method, the first purchased items are sold first. The value of the ending inventory consists of the recently purchased items. Last-in-First-Out (LIFO): In Last-in-First-Out method, the last purchased items are sold first. The value of the closing stock consists of the initially purchased items. Working notes: Calculate the Cost of Goods Sold under FIFO method. Purchases Units Rate Amount January 1,000 @ $100.00 $100,000 July 4,000 @ 121.25 $485,000 November 1,000 @ 160.00 $160,000 Sales under FIFO January Inventory 1,000 @ $100.00 $100,000 July Inventory 4,000 @ 121.25 $485,000 Total Sales 5,000 $585,000 (1) Table (2) Calculate the Cost of Goods Sold under LIFO method. Purchases Units Rate Amount January 1,000 @ $100... 2. To determine Under which method net income is higher by comparing both FIFO and LIFO method and explain the reasons.

Financial Accounting (12th Edition) (What's New in Accounting)

12th Edition

ISBN: 9780134725987

Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.

Publisher: PEARSON

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Inventory Accounting

Inventory accounting is that branch of accounting that helps in determining the specific value of assets at different stages of production and development.

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Chapter 6, Problem 6.83DC

To determine

To prepare: The income statement for the Corporation J under FIFO and under LIFO.

To determine

Under which method net income is higher by comparing both FIFO and LIFO method and explain the reasons.

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Chapter 6, Problem 6.82SC

Chapter 6, Problem 6.85EIC

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Mr. J, the owner of ABC Company engaged in the sale of XYZ products, presented you with the following data as of February 28, 2021. Inventory, beginning Inventory, ending Gross Profit Rate 50,000 75,000 20% based on Sales Cost of Goods Sold 100,000 Sales are anticipated to increase at a rate of 10% each month in the next four months. 60% of the sales made were on account. Percentage of collection based on previous operations: 20% at the month of sale 30% the following month 30% after 2 months 20% after 3 months. Cash purchases comprise 60% of the total purchases. Purchases are projected to remain constant within the next four months. Percentage of payments based on previous operations: 10% at the month of sale 30% the following month 20% after 2 months 40% after 3 months. By March, Mr. J will receive the proceeds from his approved short-term loan of 15,000 with 3% annual interest contracted last January. Monthly interests will be paid beginning in March. This coming May, Mr. J expects…

The following information pertains to the inventory of Parvin Company: Jan. 1 Beginning inventory Purchased Purchased Apr. 1 Oct. 1 During the year, Parvin sold 3,485 units of inventory at $45 per unit and incurred $15,700 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 30 percent income tax rate. Parvin started the period with cash of $200,600, inventory of $6,400, common stock of $183,000, and retained earnings of $24,000. Required a. Prepare income statements using FIFO and LIFO. b. Determine the amount of income tax that Parvin would pay using each cost flow method. c. Determine the cash flow from operating activities under FIFO and LIFO. PARVIN COMPANY Income Statements For the Year Ended December 31 FIFO Complete this question by entering your answers in the tabs below. Sales Cost of goods sold Gross margin Required A Required B Required C Prepare income statements using FIFO and…

At the beginning of the year, Bryers Incorporated reports inventory of $8,000. During the year, the company purchases additional inventory for $23,000. At the end of the year, the cost of inventory remaining is $10,000. Calculate cost of goods sold for for the year.

Chapter 6 Solutions

Financial Accounting (12th Edition) (What's New in Accounting)

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The income statement for the Corporation J under FIFO and under LIFO.

Solution Summary: The author explains how to prepare the Income Statement for the Corporation J under FIFO and LIFO.