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Individual Assignment-1DEPARTMENT OF ACCOUNT & FINANCEProgram: MBA summerCourse: Financial & Managerial AccountingByMulukenTiruyeKassieI.D No BDU0705181PS1styear MBA StudentSubmitted to DR. FirewAsres /Ass.Prof/September2015Individual assignment1
1.ABC Companyprovides a product to its regular customers. Assume that ABCbegan June byholding 10 units of its merchandise inventory that cost $60 each. During June, ABCboughtand sold inventory as follows:Jun 3Sold 8 units for $100 each16Purchased 10 units @ $56 each23Sold 8 units for $100 eachRequirements1.Prepare a perpetual inventory record for ABC companyusing FIFO, LIFO, andAverage cost.2.Show the computation of gross profit for each method.3.Which method maximizes net income? Which method minimizes income taxes?Answer
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June, 1610@ $ 56 = 560$ 680June, 238 @ $ 56 =$ 448$ 232Jeneral JornalDateAccount titleDrCr.June3Cash800Sales800Cost of goods sold480Inventory480June23Cash800Sales800Cost of goods sold448Inventory448Average costJeneGeneralJornalDateAccount titleDrCr.June3Cash800Sales800Cost of goods sold480Inventory480June23Cash800Sales800Cost of goods sold453.33Inventory453.33Using FIFO, Gross profite =Sales - Cost of goods sold= $ 1600 - $ 936= $6643DatePurchaseCost of goods soldInventory balansebig[email protected] $ 60 = 600$ 600Jun, 3[email protected] $60 =$ 480$ 120June, 1610@ $ 56 = 560$ 680June, 238 @ $ 56.67 =$ 453.33$ 226.67
Using LIFO, Gross profite =Sales - Cost of goods sold= $ 1600 -$ 928= $ 672Using Average, Gross profite =Sales - Cost of goods sold= 1600 -933.33= 666.67Henceas we see above net income maximizes in LIFOmethod but incometax minimizes in FIFO method2.Suppose XY Company has the following inventory records for July 2013: Operating expensefor July was $1,900.DateItemQuantityUnit costSale priceJul1Beginning inventory100units10Purchase60units915Sale70units$2021Purchase100units1030sale90units25Requirement1.Calcualte the cost of goods sold unerFIFO, LIFO, and Average cost.$8
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Cost of goods sold780Inventory780UsingLIFODatePurchaseCost of goods soldInventory balanseJuly 1[email protected] $ 8 =$800$ 800July, 1060 @ 9 = $540$ 1340July, 1560 @ $ 9 = $ 540[email protected] 8 = 80$ 720July, 21100 @ $ 10 = $ 1000$ 1720July, 3090 @ $ 10 = 900$ 820Jeneral JornalDateAccount titleDrCr.July15Cash1400Sales1400Cost of goods sold620Inventory620July30Cash2250Sales2250Cost of goods sold900Inventory900Average costDatePurchaseCost of goods soldInventory balanseJuly 1[email protected] $ 8 =$800$ 800July, 1060 @ 9 = $540$ 1340July, 1570 @8.375 =$586.25$ 753.75July, 21100 @ $ 10 = $ 1000$ 1753.75July, 3090 @ 9.23 = $ 830.7$ 923.05Jeneral JornalDateAccount titleDrCr.

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