Family Appliance Mart Ltd. began operations on May 1 and uses a perpetual inventory system. During May,
Question:
Family Appliance Mart Ltd. began operations on May 1 and uses a perpetual inventory system. During May, the company had the following purchases and sales for one of its products
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Instructions
(a) Determine the cost of goods sold and cost of ending inventory using (1) FIFO and (2) average cost. Ignore the effect of income tax. (For cost average, use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.)
(b) What guidelines should Family Appliance Mart consider in choosing between the FIFO and average cost formulas?
(c) Which cost formula produces the higher gross profit and net income?
(d) Which cost formula produces the higher ending inventory valuation?
(e) Which cost formula produces the higher cash flow?
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...
Step by Step Answer:
a 1 FIFO Check 63200 19400 82600 2 Average Cost Unrounded numbers have been used in the average cost ...View the full answer
Financial Accounting Tools for Business Decision Making
ISBN: 978-1119368458
7th Canadian edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine
