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Please help to check whether my answer is correct and answer the questions. Thank you!!! ABC Company is purchasing and selling only one type of
Please help to check whether my answer is correct and answer the questions. Thank you!!!
ABC Company is purchasing and selling only one type of inventory. The firm had had the Inventory of 200 units purchased at $20/unit for Inventory schedule during Year 1 and 2 the beginning Inventory at year 1. The firm used FIFO Inventory cost flow method during the year 1 and LIFO for the year 2. Dates Units Cost/unit Total cost Beg. Inv. 200 20 4,000 Requirement 1. Journalized all the entries and build F/S for year 1&2. Assume all are cash transactions. Directly post all the journal entries 2/28/x1 400 24 9,600 to the Financial Statements. Note that all the journal entries must be linking to F/S. Directly typing the values on the F/S is accounting fra: 5/30/x1 500 28 14,000 that will result in significant point reduction. 11/1/X1 500 30 15,000 2/1/X2 200 40 8,000 Total 1,800 50,600 2/28/x1, Purchased inventory of 400 units @ $24/unit Dr. Account ($) Cr. Account ($) ABC B/S, as of 12/31/x1 ABC B/S, as of 12/31/x2 Inventory 9,600 Cash 9,600 Assets Liablities Assets Liablities Cash 9,560 Note Payable 24,000 Cash 19,760 Note Payable 24,000 5/30/x1, Purchased inventory of 500 units @ $28/unit Inventory 23,400 Inventory 17,400 Inventory 14,000 Cash 14,000 Equities Equities R/E 8,960 R/E 13,160 10/1/x1, Sold the Inventory 800 units @ $40/unit Cash 32.000 Sales 32,000 Total Asset 32.960 Total L+E 32.960 Total Asset 37,160 Total L + E 37,160 COGS 19,200 Inventory 19,200 ABC I/S, for the year ended 12/31/X1 ABC I/S, for the year ended 12/31/x2 11/1/X1, Purchased inventory of 500 units @ $30/unit Sales 32,000 20,000 Inventory 15,000 Cash 15,000 (Cost of Goods Sold) (19,200) (Cost of Goods Sold) (14,000) = Gross Profit 12,800 = Gross Profit 6,000 12/31/x1, Paid tax (Income before tax x 30%). (Operating Expense) (Operating Expense) Assume there has been no other transactions for the year 1. = Operating Income = Operating Incor Tax expense 3,840 Cash 3,840 Other Revenue & Gain Other Revenue & Gain (Other Expense & Loss) (Other Expense & Loss) 2/1/X2, Purchased inventory of 200 units @ $40/unit = Income before tax 12.800 = Income before tax 6,000 Inventory 8,000 Cash 8,000 (Tax: 30%) (3,840) (Tax: 30%) (1.800) = Net Income 8,960 = Net Income 6/1/X2, Sold the Inventory of 400 units @ $50/unit Note that the firm changed the Inventory cost flow from FIFO to LIFO for the year 2. Requirement 2. (1) Describe the LIFO effects under Inflation in terms of COGS, Ending Inventory, Gross Profit, Cash 20,000 Sales 20,000 and Tax. (2) Why would company try to choose LIFO for some reasons? COGS 14,000 Inventory 14,000 Sales 4,200 12/31/x2, Paid tax (Income before tax x 30%) Assume there has been no other transactions for the year 2. Tax Expense 1,800 Cash 1,800Step by Step Solution
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