Exam 2 solution

# Exam 2 solution - (ii) COGS under FIFO would have been...

This preview shows page 1. Sign up to view the full content.

Question 1 (8 points) OWNERS' EQUITY Cash Cost Accumulated Depreciation Retained Earnings Beginning Balance 5/31/2006 520,000 (135,000) 1. Use of assets (40,000) (40,000) 2. Purchase of assets (110,000) 110,000 3. Sale of assets 1,850 (20,000) 1 15,000 2 (3,150) Ending Balance 5/31/2007 610,000 (160,000) 1 520,000 + 110,000 - (1) = 610,000, so (1) = 20,000. 2 -135,000 - 40,000 + (2) = -160,000, so (2) = 15,000 Question 2 (8 points) LIFO FIFO Beginning (1/1/2007) 5,000 5,000 Purchases 21,000 21,000 COGS (20,000) (19,500) Ending (12/31/2007) 6,000 6,500 (i) Total purchase made by the company during the year is \$21,000. (= Ending LIFO Inv + LIFO COGS - Beginning LIFO Inv = 6,000 + 20,000 - 5,000 = 21,000)
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: (ii) COGS under FIFO would have been \$19,500. (= Beginning FIFO Inv + Purchases - Ending FIFO Inv = 5,000 + 21,000 _ 6,500 = 19,500) (iii) LIFO will result in lower taxes in 2006. Because the company incurs COGS of \$500 more under LIFO relative to FIFO, the tax saving is \$200. (= 500*.4 = 200) (iv) LIFO will result in lower after tax net income in 2006 by \$300. (= Difference in COGS - Difference in Taxes = 500 - 200 = 300) Queston 3 (4 poinits) 1 F 2 T 3 F 4 F 5 F ASSETS...
View Full Document

## This note was uploaded on 11/24/2009 for the course BA 2301 taught by Professor Mattpolze during the Fall '08 term at University of Texas at Dallas, Richardson.

Ask a homework question - tutors are online