TAX_T1_Sol15.pdf - 62. Award: 10.00 points Kip started a...

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62.Award: 10.00 pointsKip started a wholesale store this year selling bulk peanut butter. In January of this year Kippurchased an initial five tubs of peanut butter for a total cost of $5,000. In July Kip purchased threetubs for a total cost of $6,000. Finally, in November Kip bought two tubs for a total cost of $1,000.Kip sold six tubs by year end. What is Kip's ending inventory under the FIFO cost-flow method?$12,000$6,000$5,000$2,500$1,000
Kip had $12,000 of goods available for sale. Under the FIFO method he sold all five tubs fromJanuary ($5,000) and one of the tubs from July ($2,000). Hence, his ending inventory consisted of$5,000 (two tubs from July $4,000 plus both tubs from November $1,000). Note that taxpayers(other than tax shelters) with average annual gross receipts of $25 million or less over the threeprior tax years can elect to use the cash method of accounting for the purchase, production, or saleof merchandise.ReferencesMultiple ChoiceDifficulty: 1 EasyLearning Objective: 01-05 Apply cash andaccrual methods to determine businessincome and expense deductions.

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Term
One
Professor
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Tags
Balance Sheet, Kip, cash method

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