Inventory Costing MethodsPeriodic System Following is an inventory acquisition schedule for Fees Corp. for 2010: Units Unit
Question:
Inventory Costing Methods—Periodic System Following is an inventory acquisition schedule for Fees Corp. for 2010:
Units Unit Cost Beginning inventory 4,000 $20 Purchases:
February 4 2,000 18 April 12 3,000 16 September 10 1,000 14 December 5 2,500 12 During the year, Fees sold 11,000 units at $30 each. All expenses except cost of goods sold and taxes amounted to $60,000. The tax rate is 30%.
Required 1. Compute cost of goods sold and ending inventory under each of the following three methods assuming a periodic inventory system:
(a) weighted average, (b)
FIFO, and
(c) LIFO.
2. Prepare income statements under each of the three methods.
3. Which method do you recommend so that Fees pays the least amount of taxes during 2010? Explain your answer.
4. Fees anticipates that unit costs for inventory will increase throughout 2011. Will Fees be able to switch from the method you recommended that it use in 2010 to another method to take advantage of the increase in prices for tax purposes?
Explain your answer.
AppendixLO1
Step by Step Answer:
Using Financial Accounting Information The Alternative To Debits And Credits
ISBN: 9780538452748
7th Edition
Authors: Curtis L. Norton, Gary A. Porter