At the beginning of the current period, assume that Hayes Corp. holds 1,000 units of a certain product with a unit cost of $18. A summary of purchases during the current period follows. During the current period, the company sells 2.800 unite ot one an 1. Assume Hayes uses first-in, first-out method, compute cost of goods sold and ending inventory. 2. Assume Hayes uses last-in, first-out method, compute cost of goods sold and ending inventory. 3. Assume Hayes uses average cost method, compute cost of goods sold and ending inventory. 4. As an investor, which of the three methods would you prefer to see Hayes use? Provide at least two reasons as justification. 5. Assume that Hayes reports its inventories on a FIFO basis. If the lower of cost or market value for these goods is $30,000, at what amount would the inventory be reported on the balance sheet? 6. Assume that Hayes is using LIFO for this product and it delays purchasing lot \# 3 until the a few weeks into the next period. Compute the cost of goods sold and gross profit under this assumption. 7. The compute gross profit from question 2 above and compare and contrast with what you computed for gross profit in question 6. 8. Assume Hayes uses LIFO for this product. What disclosures would it have to make? Prepare the note... and indicate how this would affect the tax expense for the current period (as compared to FIFO) assuming a marginal tax rate of 21%. At the beginning of the current period, assume that Hayes Corp. holds 1,000 units of a certain product with a unit cost of $18. A summary of purchases during the current period follows. During the current period, the company sells 2.800 unite ot one an 1. Assume Hayes uses first-in, first-out method, compute cost of goods sold and ending inventory. 2. Assume Hayes uses last-in, first-out method, compute cost of goods sold and ending inventory. 3. Assume Hayes uses average cost method, compute cost of goods sold and ending inventory. 4. As an investor, which of the three methods would you prefer to see Hayes use? Provide at least two reasons as justification. 5. Assume that Hayes reports its inventories on a FIFO basis. If the lower of cost or market value for these goods is $30,000, at what amount would the inventory be reported on the balance sheet? 6. Assume that Hayes is using LIFO for this product and it delays purchasing lot \# 3 until the a few weeks into the next period. Compute the cost of goods sold and gross profit under this assumption. 7. The compute gross profit from question 2 above and compare and contrast with what you computed for gross profit in question 6. 8. Assume Hayes uses LIFO for this product. What disclosures would it have to make? Prepare the note... and indicate how this would affect the tax expense for the current period (as compared to FIFO) assuming a marginal tax rate of 21%
