ACCT - assumptions P6-7A The management of Utley Inc asks...

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Vasquez Ltd. is a retailer operating in Edmonton, Alberta. Vasquez uses the perpetual inventory method. All sales returns from customers result in the goods being returned to inventory; the inventory is not damaged. Assume that there are no credit transactions; all amounts are settled in cash. You are provided with the following information for Vasquez Ltd. for the month of January 2010. Description Quantity Ending inventory 150 Purchase 100 Sale 150 Sale return 10 Purchase 75 Purchase return 15 Sale 50 Purchase 100 Sale 110 Hint: Calculate cost of goods sold and ending inventory for FIFO, average-cost, and LIFO under the perpetual system; compare gross profit under each assumption. (SO 7 )
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Instructions (a) For each of the following cost flow assumptions, calculate (i) cost of goods sold, (ii) ending inventory, and (iii) gross profit. Gross profit: LIFO $6,330 FIFO $7,500 Average $7,090 (b) Compare results for the three cost flow
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Unformatted text preview: assumptions. P6-7A The management of Utley Inc. asks your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods. For 2010 the accounting records show these data. ory, January 1 (10,000 units) $ 3 f 120,000 units purchased 50 g price of 100,000 units sold 66 ting expenses 13 Units purchased consisted of 35,000 units at $4.00 on May 10; 60,000 units at $4.20 on August 15; and 25,000 units at $4.50 on November 20. Income taxes are 28%. Hint: Compute ending inventory, prepare income statements, and answer questions using FIFO and LIFO. (SO 2 , 3 ) Instructions (a) Prepare comparative condensed income statements for 2010 under FIFO and LIFO. (Show computations of ending inventory.) Gross profit: FIFO $259,000 LIFO $240,500 (b) Answer the following questions for management in the form of a business letter....
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ACCT - assumptions P6-7A The management of Utley Inc asks...

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