Question 1:

Kayla Company uses the perpetual inventory system and the LIFO method. The following information is available for the month of June:

June 1		Beginning inventory		200 units @ $5
12		Purchase on account		400 units @ $6
15		Sales on account		440 units
23		Purchase on account		300 units @ $7
27		Sales on account		360 units

The selling price (price the company charged the customers) was $10 per unit.

a) Show the calculation of cost of goods sold and ending inventory under LIFO.

b) What is the amount of Sales Revenue?

c) Prepare a journal entry for the sale of inventory on June 15.

d) In which financial statement does the amount of ending inventory appear?

e) In which financial statement do the amount of sales and amount of cost of goods sold appear?

f) What is the amount of gross margin for month June?

g) What is the gross margin percentage?

Question 2: The controller of Alt Company is applying the lower-of-cost-or-net realizable value basis of valuing its ending inventory. The following information is available:

			Cost			Net Realizable Value
Lawnmowers:
Self-propelled			$14,800			$17,000
Push type			19,000			18,000
Total			33,800			35,000
Snowblowers:
Manual			29,800			31,000
Self-start			19,000			21,000
Total			48,800			52,000
Total inventory			$82,600			$87,000

Compute the value of the ending inventory by applying the lower-of-cost-or-NRV. Show your work.

Question 3: The management of Svetlana Corp. is considering the effects of inventory-costing methods on its financial statements and its income tax expense. Assuming that the price the company pays for inventory is increasing, which method will:

a. Provide the highest net income, LIFO or FIFO?

b. Provide the highest ending inventory, LIFO or FIFO?

c. Result in the lowest income tax expense, LIFO or FIFO?