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Inventory Handout _2

# Inventory Handout _2 - (revenue Compute the following...

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GB 201 Fall 2006 Class Notes for Day # 25 Page 1 GB112 Inventory Handout #2 I. Kathy Company’s accounts reflected the following data: Units Amount Beginning inventory 6,000 \$ 30,000 Purchases 32,000 192,000 Sales 28,000 280,000 Requirement 1: If the company wants to compare amounts using the (1) FIFO and (2) LIFO inventory methods, compute the following amounts: (1) FIFO (2) LIFO A. Ending inventory \$60 K \$54 K B. Cost of Goods Sold \$162 K \$168 K C. Gross margin \$118 K \$112 K Requirement 2: Conceptually, how does pretax income using FIFO (in times of rising prices) compare to LIFO pretax income? Explain your answer. The profits will be taxed more using FIFO because the gross margin is higher since all the goods that the company spent less on are those being deducted from the inventory first. In a period of rising prices, FIFO will be higher than LIFO. II. Yoakum Company reported the following information related to inventory and sales Units Unit Cost Beginning inventory 100 \$ 7 Purchase No. 1 700 10 Purchase No. 2 200 12 Sales--700 units at \$20 per unit.

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Unformatted text preview: (revenue) Compute the following amounts: Inventory Costing Method Revenue Cost of Goods Sold Gross Margin Balance Sheet Inventory FIFO \$14,000 \$6,700 \$7,300 \$3,400 LIFO \$14,000 \$7,400 \$6,600 \$2,700 GB 201 Fall 2006 Class Notes for Day # 25 Page 2 III. Given a particular set of facts and assumptions, the following pairs of amounts were computed using FIFO and LIFO. For each pair of amounts, indicate which amount resulted from applying FIFO, and which amount resulted from applying LIFO. Enter either FIFO or LIFO in each blank. A. Prices are rising, ending inventory is: 1. \$14,500 ____________FIFO 2. \$14,000 ____________LIFO B. Prices are rising, cost of goods sold is: 1. \$6,500 _____________LIFO 2. \$5,000 _____________FIFO C. Prices are falling, ending inventory is: 1. \$6,500 _____________LIFO 2. \$5,000 _____________FIFO D. Prices are falling, cost of goods sold is: 1. \$8,700 _____________LIFO 2. \$9,000 _____________ FIFO...
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Inventory Handout _2 - (revenue Compute the following...

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