AC221 Special Problem Ch. 07

AC221 Special Problem Ch. 07 - $7,400 $6,600 December 31,...

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SP7-1: IMPACT OF INVENTORY METHOD ON REPORTED EARNINGS (HS) James River Enterprises began business on January 1, 1997. Information about its inventories under different valuation methods is shown below. Using this information, you are to choose the phrase that best answers each of the following questions. [HINT. Use the formulae for cost of goods sold and gross profit to work out your answers.] Date Inventory Value (using four alternative accounting Methods) Method A Method B Method C Method D December 31, 1997 $8,800 $8,000
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Unformatted text preview: $7,400 $6,600 December 31, 1998 6,900 6,800 6,600 6,500 December 31, 1999 9,000 10,000 11,000 9,600 1. The inventory basis that would show the highest net income for 1997 is: . 2. The inventory basis that would show the highest net income for 1998 is: . 3. The inventory basis that would show the lowest net income for the period combining together the three years is: . 4. For the year 1998, how much higher (or lower) would profits be on the Method B basis than on the Method D basis? Higher / lower...
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AC221 Special Problem Ch. 07 - $7,400 $6,600 December 31,...

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