Financial Accounting

John Smith is a merchandiser and purchased two toy cars to resell. The cars were identical in every respect except that John purchased them at different times at different costs. The first car purchased cost $25. The second one purchased cost $31. Costs appear to be rising (ie, an inflationary environment). John sold one of the cars for $40 cash. John's non-inventory cash operating expenses (i.e. S,G&A) were $5. Based on this, and an income tax rate of 30%, what was John's net income? Required: 1) Read Chp 5 & Complete your Connect "Graded Preview" first. 2) Prepare an income statement under each "cost flow" assumption below. Note: Different outcomes will result depending on the cost flow assumed! John Smith Income Statement Cost Flow Assumption >>>> "FIFO" "LIFO" "WAVG" Sales Revenue (cash) $40 $40 $40 Cost of Goods Sold (expense) Gross Margin (aka: Gross Profit) Operating Expenses (S, G&A) Pre-tax Income Income Taxes Paid @ 30% Net Income (aka: Net Profit) Addn question: Under each method, how much cash (cash flow) will be available to replenish the cost of the next inventory item (toy car) bought