# FARE Lecture Review 12.pdf - [The following information...

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Unformatted text preview: [The following information applies to the questions displayed below.] Laker Company reported the following January purchases and sales data for its only product. Date Jan. 1 Jan. 10 Jan. 20 Jan. 25 Jan. 30 Activities Beginning inventory Sales Purchase Sales Purchase Units Acquired at Cost Units sold at Retail 140 units @ \$6.00 = \$ 840 100 units @ \$ 15 60 units @ \$5.00 = 300 80 units @ \$ 15 180 units @ \$4.50 = 810 Totals 380 units \$1,950 180 units 27. Award: 10.00 points Required information Problems? Adjust credit for all students. Required: The Company uses a periodic inventory system. For specific identification, ending inventory consists of 200 units, where 180 are from the January 30 purchase, 5 are from the January 20 purchase, and 15 are from beginning inventory. Determine the cost assigned to ending inventory and to cost of goods sold using (a) specific identification, (b) weighted average, (c) FIFO, and (d) LIFO. Complete this questions by entering your answers in the below tabs. Specific Id Weighted Average FIFO LIFO Determine the cost assigned to ending inventory and to cost of goods sold using LIFO. d) LIFO Cost of Goods Available for Sale Cost of Goods Sold Cost of Goods Cost per # of units Cost per # of units Available for unit sold unit Sale Beginning inventory F 140 F 6.00 F Jan. 20 F 60 F 5.00 F Jan. 30 F 180 F 4.50 F F 380 \$ Ending Inventory # of units Cost in ending per unit inventory Cost of Goods Sold Ending Inventory 840 F F 140 F \$ 6.00 F 300 F F 60 F \$ 5.00 F \$ 840 Purchases: Total F 810 \$ 1,950 180 F \$ 4.50 180 F F FIFO 810 F \$ 810 LIFO Explanation: (a) Specific identification (180 × \$4.50) + (5 × \$5.00) + (15 × \$6) \$1,950 – \$925 (b) Weighted average (\$1,950 / 380 units = \$5.13* average cost per unit) 200 × \$5.132 180 × \$5.132 (c) FIFO (180 × \$4.50) + (20 × \$5.00) (140 × \$6.00) + (40 × \$5.00) (d) LIFO (140 × \$6.00) + (60 × \$5.00) (180 × \$4.50) *rounded. Hints Hint #1 References Ending Inventory \$ 925.00 \$1,026.40 \$ 910.00 \$1,140.00 Cost of Goods Sold \$1,025.00 \$ 923.76 \$1,040.00 \$ 810.00 F F 200 300 F F \$ 1,140 28. Award: 10.00 points Required information Problems? Adjust credit for all students. Required: 1. Complete comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are \$1,250, and that the applicable income tax rate is 40%. (Round your average cost per unit to 2 decimal places.) LAKER COMPANY Income Statements For Month Ended January 31 Specific Weighted Identification Sales \$ Cost of goods sold Gross profit Average 2,700 \$ 1,025+/-1 1,675+/-1 F Expenses F Income tax expense Net income F \$ \$ 923+/-1 1,777+/-1 F 1,250 Income before taxes FIFO 2,700 F 170+/-1 255+/-1 F \$ \$ 1,040+/-1 1,660+/-1 F 1,250 425+/-1 LIFO 2,700 F 1,890+/-1 410+/-1 F 640+/-1 164+/-1 246+/-1 F 1,250 527+/-1 F 211+/-1 316+/-1 F \$ 2,700 810+/-1 1,250 \$ 256+/-1 384+/-1 2. Which method yields the highest net income? LIFO Specific identification FIFO Weighted average 3. Does net income using weighted average fall between that using FIFO and LIFO? No Yes 4. If costs were rising instead of falling, which method would yield the highest net income? FIFO LIFO Weighted average Specific identification Explanation: 1. Sales (180 units × \$15 price) = \$2,700. 2. LIFO method results in the highest net income of \$384.00. 3. Weighted average net income of \$315.96 falls between the FIFO net income of \$246.00 and the LIFO net income of \$384.00. 4. If costs were rising instead of falling, then the FIFO method would yield the highest net income. Hints Hint #1 References [The following information applies to the questions displayed below.] Hemming Co. reported the following current-year purchases and sales for its only product. Date Activities Jan. 1 Beginning inventory Jan. 10 Sales Mar. 14 Purchase Mar. 15 Sales July 30 Purchase Oct. 5 Sales Oct. 26 Purchase Totals Units Acquired at Cost 200 units @ \$10 = \$ 2,000 350 units @ \$15 = 5,250 450 units @ \$20 = 9,000 100 units @ \$25 = 2,500 Units Sold at Retail 150 units @ \$40 300 units @ \$40 430 units @ \$40 1,100 units 880 units \$18,750 ...
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