ch 6 - Solutions to Chapter 6 suggested problems BRIEF...

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Unformatted text preview: Solutions to Chapter 6 suggested problems BRIEF EXERCISE 6-2 (a) The ending inventory under FIFO consists of 400 units at $9 for a total allocation of $3,600. (b) The ending inventory under LIFO consists of 300 units at $6 + 100 units at $8 for a total allocation of $2,600 ($1,800 + $800). BRIEF EXERCISE 6-3 Average unit cost is $7.92 computed as follows: 300 X $6 = $1,800 400 X $8 = 3,200 500 X $9 = 4,500 1,200 $9,500 $9,500 1,200 = $7.92 The cost of the ending inventory is $3,168 (400 X $7.92). BRIEF EXERCISE 6-4 (a) FIFO would result in the highest net income. (b) FIFO would result in the highest ending inventory. (c) LIFO would result in the lowest income tax expense (because it would result in the lowest taxable income). (d) Average cost would result in the most stable income over a number of years be- cause it averages out any big changes in the cost of inventory. BRIEF EXERCISE 6-7 Inventory turnover ratio: $265,104 ($98,691+ $115,061) 2 = $265,104 $106,876 = 2.48 Days in inventory: 365 2.48 = 147 days 6-1 EXERCISE 6-4 (a) FIFO Beginning inventory (14 X $97) $ 1,358 Purchases Sept. 12 (45 X $102) $4,590 Sept. 19 (20 X $104) 2,080 Sept. 26 (50 X $105) 5,250 11,920 Cost of goods available for sale 13,278 Less: Ending inventory (11 X $105) 1,155 Cost of goods sold...
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ch 6 - Solutions to Chapter 6 suggested problems BRIEF...

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