# C which method results in the higher cost of goods

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(c) Which method results in the higher cost of goods sold? Why? E6-7 Jones Company had 100 units in beginning inventory at a total cost of \$10,000.The com- pany purchased 200 units at a total cost of \$26,000. At the end of the year, Jones had 80 units in ending inventory. Instructions (a) Compute the cost of the ending inventory and the cost of goods sold under (1) FIFO, (2) LIFO, and (3) average-cost. (b) Which cost flow method would result in the highest net income? (c) Which cost flow method would result in inventories approximating current cost in the bal- ance sheet? (d) Which cost flow method would result in Jones paying the least taxes in the first year? E6-8 Inventory data for Yount Company are presented in E6-6. Instructions (a) Compute the cost of the ending inventory and the cost of goods sold using the average-cost method. Compute inventory and cost of goods sold using FIFO and LIFO. (SO 2) Compute inventory and cost of goods sold using FIFO and LIFO. (SO 2, 3) Compute inventory under FIFO, LIFO, and average-cost. (SO 2, 3) Compute inventory and cost of goods sold using average-cost. (SO 2, 3) PDF Watermark Remover DEMO : Purchase from to remove the watermark

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Instructions Determine the amount of the ending inventory by applying the lower-of-cost-or-market basis. E6-10 Conan Company applied FIFO to its inventory and got the following results for its end- ing inventory. Cameras 100 units at a cost per unit of \$65 DVD players 150 units at a cost per unit of \$75 iPods 125 units at a cost per unit of \$80 The cost of purchasing units at year-end was VCRs \$71, DVD players \$69, and iPods \$78. Instructions Determine the amount of ending inventory at lower-of-cost-or-market. E6-11 Lebo Hardware reported cost of goods sold as follows. 284 Chapter 6 Inventories Item Units Unit Cost Market Cameras: Minolta 5 \$170 \$156 Canon 6 150 152 Light meters: Vivitar 12 125 115 Kodak 14 120 135 (b) Will the results in (a) be higher or lower than the results under (1) FIFO and (2) LIFO? (c) Why is the average unit cost not \$6? E6-9 Americus Camera Shop uses the lower-of-cost-or-market basis for its inventory.The fol- lowing data are available at December 31. 2010 2011 Beginning inventory \$ 20,000 \$ 30,000 Cost of goods purchased 150,000 175,000 Cost of goods available for sale 170,000 205,000 Ending inventory 30,000 35,000 Cost of goods sold \$140,000 \$170,000 2010 2011 Sales \$210,000 \$250,000 Cost of goods sold Beginning inventory 32,000 44,000 Cost of goods purchased 173,000 202,000 Cost of goods available for sale 205,000 246,000 Ending inventory 44,000 52,000 Cost of goods sold 161,000 194,000 Gross profit \$ 49,000 \$ 56,000 Lebo made two errors: (1) 2010 ending inventory was overstated \$3,000, and (2) 2011 ending in- ventory was understated \$6,000. Instructions Compute the correct cost of goods sold for each year. E6-12 Staley Watch Company reported the following income statement data for a 2-year period. Staley uses a periodic inventory system. The inventories at January 1, 2010, and December 31, 2011, are correct. However, the ending inventory at December 31, 2010, was overstated \$5,000.
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