Selected Answers to Homework Assignment Chapter 6

# Selected Answers to Homework Assignment Chapter 6 - S BRIEF...

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Selected Answers to Homework Assignment Chapter 6     :    BRIEF EXERCISE 6-2 (a) The ending inventory under FIFO consists of 300 units at \$9 for a total allocation of \$2,700. (b) The ending inventory under LIFO consists of 300 units at \$6 for a total allocation of \$1,800. 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 \$2,376 (300 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 because it averages out any big changes in the cost of inventory. SOLUTIONS TO EXERCISES EXERCISE 6-3 (a) Do not include—Guardado does not own items held on consignment.

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(b) Include in inventory—Guardado still owns the items as they were only shipped on consignment. (c) Include in inventory—Shipping terms FOB destination means that Guardado owns the items until they reach the customer. (d)
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## This note was uploaded on 07/16/2010 for the course ACCT 2302 taught by Professor Dr.winking during the Spring '10 term at Tulane.

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Selected Answers to Homework Assignment Chapter 6 - S BRIEF...

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