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BB-Handout_4-Chapter 4

# BB-Handout_4-Chapter 4 - Handout#4-Chapter 4 Demonstration...

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Handout #4-Chapter 4 Demonstration Problem 4-1: Inventory Cost Issue A furniture store inventory includes two beds that are identical with respect to appearance, quality, and brand name. However, the store purchased the beds at different times for different prices. The first bed cost the store \$400, and the second bed cost \$450. Assume the store sells one of the beds for \$600. Also assume the store manager cannot identify which bed was sold. Required Determine the gross margin on the sale of the bed. Demonstration Problem 4-1: Work Paper FIFO LIFO Weighted Average Sales Cost of Goods Sold Gross Margin 4-1

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Demonstration Problem 4-2: Inventory Cost Flow Assumptions Crystal Apple Sales Company began 2010 with cash of \$2,000, inventory of \$3,600 (200 crystal apples that cost \$18 each), \$2,500 of common stock, and \$3,100 of retained earnings. The following events occurred during 2010. 1. Crystal Apple purchased additional inventory twice during 2010. The first purchase consisted of 800 apples that cost \$20 each, and the second consisted of 1,200 apples that cost \$24 each. The purchases were on account. 2. The company sold 2,040 apples for cash at a selling price of \$40 each. 3. The company paid \$44,800 cash on accounts payable for inventory purchases. 4. Crystal Apple paid \$26,000 cash for operating expenses. 5. Assume an income tax rate of 30 percent. Crystal Apple paid income tax expense in cash. Required a. Determine the ending inventory and cost of goods sold using the three different cost flow assumptions: FIFO, LIFO, and Weighted Average. b. Prepare an income statement, a balance sheet, and a statement of cash flows under each of the three cost flow assumptions.
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BB-Handout_4-Chapter 4 - Handout#4-Chapter 4 Demonstration...

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