Exercise 6-49 Effects of Inventory Costing Methods Borgia Enterprises has the following statement of earnings data available for 2018: Sales revenue Operating expenses Interest expense $737,200 243,700 39,500 34% Income tax rate Borgia uses a perpetual inventory accounting system and the weighted average cost method. Borgia is considering adopting the FIFO method for costing inventory. Borgia's accountant prepared the following data: If Weighted Average Cost Used $ 61,850 403,150 If FIFO Used $ 80,200 384,800 Ending inventory Cost of goods sold Required: 1. Compute income before taxes, Income tax expense, and net income for both of the inventory costing methods (rounded to the nearest dollar). Weighted Average Cost FIFO Income before taxes Income tax expense / Tax savings due to loss Net Income 2. CONCEPTUAL CONNECTION: Why are the cost of goods sold and ending inventory amounts different for each of the two methods? What do these amounts tell us about the purchase price of inventory during the year? The input in the box below will not be automatically graded, but may be reviewed and considered by your instructor 3. CONCEPTUAL CONNECTION: Which method produces the most realistic amount for net income? For inventory? For net income Weighted average method For inventory FIFO method Explain your answer. The input in the box below will not be automatically graded, but may be reviewed and considered by your instructor Exercise 6-49 Effects of Inventory Costing Methods Borgia Enterprises has the following statement of earnings data available for 2018: Sales revenue $737,200 243,700 Operating expenses Interest expense 39,500 34% Income tax rate Borgia uses a perpetual inventory accounting system and the weighted average cost method. Borgia is considering adopting the FIFO method for costing inventory. Borgia's accountant prepared the following data: If FIFO Used If Weighted Average Cost Used $ 61,850 Ending inventory Cost of goods sold $ 80,200 384,800 403,150 Required: 1. Compute income before taxes, income tax expense, and net income for both of the inventory costing methods (rounded to the nearest dollar). Weighted Average Cost FIFO Income before taxes Income tax expense / Tax savings due to loss Net income 2. CONCEPTUAL CONNECTION: Why are the cost of goods sold and ending Invitory amounts different for each of the two methods? What do these amounts tell about the purchase price of inventory during the year? The input in the box below will not be automatically graded, but may be reviewed and considered by your instructor 3. CONCEPTUAL CONNECTION: Which method produces the most realistic amount for net income? For Inventory? For net income Weighted average method For inventory FIFO method Explain your answer. The input in the box below will not be automatically graded, but may be reviewed and considered by your instructor