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JoesTV

# JoesTV - of goods sold Below is a description of Frank's...

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Joe's TV Sales (A) 1 Frank is the owner of Joe's TV. He purchased the business from Joe several years ago and decided to keep Joe's good name for the business. Frank specializes in selling a single model of a nationally known TV for a cash price of \$300. Below is a description of Frank's inventory, purchases and sales for 1993. Units Cost per unit Total Beginning inventory (Jan.1, 1993) 2 \$150 \$300 Purchases: Feb. 8, 1993 2 160 320 May 14, 1993 4 170 680 Aug. 12, 1993 4 180 720 Oct. 28, 1993 2 190 380 Dec. 4, 1993 2 200 400 Total purchases 14 \$2,500 Available for sale 16 \$2,800 Goods sold during the year 11 Ending inventory 5 Required: Assume Joe's TV uses the periodic inventory system. Compute 1993 gross profit (revenue - COGS) under each of the following cost flow assumptions: a) First-in, first-out (FIFO) b) Last-in, first-out (LIFO) c) Average cost 1 Adopted from Bowen and Pfeiffer (1982)

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Joe's TV Sales (B) Assume Frank elected to use LIFO for inventory valuation for the determination of cost
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Unformatted text preview: of goods sold. Below is a description of Frank's inventory, purchases and sales for 1994. Units Cost per unit Total Beginning inventory-LIFO (Jan. 1, 1994) Total 2 2 1 5 \$150 160 170 \$300 320 170 \$790 Purchases during 1994 10 \$200 \$2,000 Available for sale 15 \$2,790 Goods sold during 1994 14 Ending inventory- LIFO (December 31,1994) ? On December 30, 1994, Frank was trying to decide whether or not to purchase four additional TV sets from the local wholesale warehouse before the end of the fiscal year. If purchased, the units would cost \$220 each. He won't be able to sell them until around the middle of next year (1995). Frank can borrow money at 10% and his marginal tax rate is 20%. Required: Should Frank purchase the four TV's before the end of the year? Should he purchase more?...
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JoesTV - of goods sold Below is a description of Frank's...

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