Inventory_Valuation_-_Solution - adjusting journal entries...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
ABC Inc. had the following inventory schedule. Assume ABC Inc. used a periodic inventory system. a) Complete the  following  chart, given  this  information - Each unit was sold by ABC for $15 - ABC Inc.'s gross margin for the year, based on the FIFO method, was $6,400   FIFO   Weighted  Average     # of Units Total $  Amount # of Units Total $ Amount Opening Inventory 1000 10,000 1000 10,000   Purchases 1500 12,000 1500 12,000   Ending Inventory 1300 10,400 1300 11,440   Cost of Sales 1200 11,600 1200 10,560   b) Assume that inventory was revalued using the Lower of Cost and Net Realizable Value (LCNRV)  rule. The Net Realizable Value of the inventory was $11,000 on the year-end date. Write the 
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: adjusting journal entries at year end under both the FIFO and Weighted Average methods. FIFO No entry (Ending Inventory value < Net Realizable Value) Weighted Average Cost of Sales 440 Inventory 440 c) After taking into account the LCNRV rule in part b), what is the change in profit of using the FIFO method as opposed to the Weighted Average method? Assume a tax rate of 30%. Difference in Profit Before 600 Tax Tax Rate 30% Difference in Profit 420...
View Full Document

This note was uploaded on 01/18/2012 for the course AFM 101 taught by Professor Kennedy during the Fall '08 term at Waterloo.

Page1 / 2

Inventory_Valuation_-_Solution - adjusting journal entries...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online