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Lecture_XIV_HW_Solutions

# Lecture_XIV_HW_Solutions - Lecture XIV HW Solutions...

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Lecture XIV HW Solutions 7-56 (20-30 min.) 1. CONTRACTOR SUPPLY CO. Comparison of Inventory Methods Statement of Gross Profit of Kemtone Cooktops For the Year Ended December 31, 20X8 (In Dollars) FIFO LIFO Weighted Average Sales, 260 units 26,200 26,200 26,200 Deduct cost of goods sold: Inventory, December 31, 20X7, 110 @ \$50 5,500 5,500 5,500 Purchases, 300 units 21,200 21,200 21,200 Cost of goods available for sale, 410 units 26,700 26,700 26,700 Deduct: Inventory, December 31, 20X8, 150 units: 100 @ \$80 8,000 50 @ \$70 3,500 11,500 110 @ \$50 5,500 40 @ \$60* 2,400 7,900 150 @ (\$26,700 ÷ 410), 150 @ \$65.12 9,768 Cost of goods sold, 260 units 15,200 18,800 16,932 Gross profit 11,000 7,400 9,268 * This is a periodic LIFO. Students are using perpetual LIFO if they answer 20 @ \$60 plus 20 @ \$80 = \$2,800. 2. Income taxes would be lower by .40(\$11,000 – \$7,400) = \$1,440. The income tax rate is assumed to be identical at all levels of taxable income. Some students will wonder why no information is given

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Lecture_XIV_HW_Solutions - Lecture XIV HW Solutions...

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