Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Daniel Company uses a periodic inventory system. Data for the current year: beginning merchandise inventory (ending inventory December 31, prior year), 2,000 units at $38;

Daniel Company uses a periodic inventory system. Data for the current year: beginning merchandise inventory (ending inventory December 31, prior year), 2,000 units at $38; purchases, 8,000 units at $40; expenses (excluding income taxes), $184,500; ending inventory per physical count at December 31, current year, 1,800 units; sales, 8,200 units; sales price per unit, $75; and average income tax rate, 20 percent.

Required:

1-a. Compute cost of goods sold under the FIFO, LIFO, and average cost inventory costing methods.

1-b. Prepare income statements under the FIFO, LIFO, and average cost inventory costing methods.

2. Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow)?

3. Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow), assuming that prices were falling?

Compute cost of goods sold under the FIFO, LIFO, and average cost inventory costing methods. Note: Do not round your intermediate calculations

Cost of Goods Sold Inventory Costing Method
Units FIFO LIFO Average Cost
Beginning inventory
Purchases
Goods available for sale 0 0 0 0
Ending inventory
Cost of goods sold

Income Statement FIFO LIFO Average Cost
Sales Revenue
Cost of goods sold
Gross profit
Operating expenses
Pretax income
Income tax expense
Net income

Net income
Income taxes paid

Net income
Income taxes paid (cash flow)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Internal Audit Practice From A To Z

Authors: Patrick Onwura Nzechukwu

1st Edition

149874205X, 978-1498742054

More Books

Students also viewed these Accounting questions

Question

design a simple disciplinary and grievance procedure.

Answered: 1 week ago