Suppose a division of a computer manufacturing company has these stock records for January 20x6:

Company accounting records reveal that operating expenses for January were £2,900, and sales of 310 units have generated sales revenue of £9,000.
Required 

1 Prepare the January income statement, showing amounts for FIFO, LIFO and weighted-average cost (WAC). Label the bottom line ‘Operating income’.
2 Suppose you are the financial accountant of that company. Which stock valuation method will you use if your motive is to

a. Minimise income taxes?

b. Report the highest operating income?

c. Report operating income between the extremes of FIFO and LIFO?

d. Report stock on the balance sheet at the most current cost?

e. Achieve the best measure of net income for the income statement?
State the reason for each of your answers.

Transcribed Image Text:

Date Item Quantity Unit cost () Jan. 1 Opening stock 100 units 8 622 Purchase 60 units 9 21 Purchase 150 units 9 27 Purchase 90 units 10