Demo 4 Solution

# Demo 4 Solution - Demonstration Problem 4-1 Solution FIFO...

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Demonstration Problem 4-1 Solution FIFO LIFO Weighted Average Sales 600 600 600 Cost of Goods Sold (400) (450) (425) Gross Margin 200 150 175

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Demonstration Problem 4-2 Solution, Inventory Summary. Crystal Apple’s 2008 inventory contains the following layers. Units Cost per Unit Total Cost Beginning Balance 200 x 18 = \$ 3,600 First Purchase 800 x 20 = 16,000 Second Purchase 1,200 x 24 = 28,800 Total Available 2,200 n/a \$48,400 Demonstration Problem 4-2 Solution, part a FIFO LIFO Weighted Average Cost of Goods Sold \$44,560 \$45,520 \$44,880 Ending Inventory \$3,840 \$2,880 \$3,520 Calculation of cost of goods sold: FIFO: 200 x \$18 + 800 x \$20 + 1,040 x \$24 LIFO: 1,200 x \$24 + 800 x \$20 + 40 x \$18 Weighted Average: \$48,400/2,200 x 2,040
Demonstration Problem 4-2 Solution, part b. Financial Statements Crystal Apple Sales Company Comparative Financial Statements Income Statements for the Year Ended December 31, 2008 FIFO LIFO W. Avg. Sales \$81,600 \$81,600 \$81,600 Cost of Goods Sold (44,560) (45,520) (44,880) Gross Margin \$37,040 \$36,080 \$36,720 Operating Expenses (26,000) (26,000) (26,000) Income before Taxes (IBT) \$11,040 \$10,080 \$10,720 Income Tax Expense (IBT x .30) (3,312) (3,024) (3,216) Net Income \$ 7,728 \$ 7,056 \$ 7,504 Balance Sheets at December 31, 2008 Assets FIFO LIFO W. Avg.

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