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HI, I need help filling this out for class. It's not homework but want to be prepared....

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After filling this out, I need to answer the following:


a). Which method would result in the higher pretax income? EPS? 

b). Which method would result in the lower income tax expense? 

   Explain, assuming a 30 percent average tax rate. 

c). Which method would produce the more favorable cash flow? Explain. 


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DONNER COMPANY
Partial Income Statement
For the Month Ended January 31, 2014 Units Total cost Unit cost ‘
Inventory, Jan. 1 500 2,365 4.73
Purchases 600 3,600 6
Purchases 160 1.280 8
Goods available for sale 1,260 7,245
Ending inventory 640
Cost of goods sold 620
Sales (given) 620 I
Selling price per unit $16 1. Prepare a summarized income statement through gross profit for the month of January under each method of inventory. (a) (b) (d (d)
‘l ‘ ‘ s edfic
Average Cost FIFO UFO p. .
Identification Sales revenue 1 Cost of goods sold - - - -
Gross profit

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Cost of goods sold calculations:
(d) Specific identification:
370 units @ $.
250 units @ $_
620
0
(a) Average cost:
Check:
Cost of Goods Available for Sale
7,245
Average cost =
Cost of Goods Avail. for Sale
Less: Cost of Goods Sold
# of units available for Sale
Ending Inventory
7,245
Average cost =
# of units in ending inventory
640
Units sold =
average cost
0
Cost of Goods Sold =
err
(b) FIFO:
units @ $
units @ $_
Must equal 620 units =>
(c) LIFO:
units @ $_
_=
units @ $_
Must equal 620 units =>

Top Answer

1. FIFO method will result in greater higher pretax... View the full answer

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Cost of goods sold calculation
Specific identification
Mose specific information requ
ofar inventory
Average cent = $7245
1260
Auresage west = $5.75
Unit sold. 2 620
cogs
=...

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