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Question 11 The management of Larkspur Co., SA is reevaluating the appropriateness of using its present inventory cost flow method. They request your help in
Question 11 The management of Larkspur Co., SA is reevaluating the appropriateness of using its present inventory cost flow method. They request your help in determining the results of operations for 2017 if either the FIFO method or the average-cost method had been used. For 2017, the accounting records show the following data. Inventories Beginning (10,800 units) Ending (16,200 units) 30,100 Purchases and Sales Total net sales (243,000 units) Total cost of goods purchased (248,400 units) 934,200 624,780 Purchases were made quarterly as follows. Quarter Units Unit Cost Total Cost 1 2.30 2 2.50 3 64,800 54,000 54,000 75,600 248,400 2.60 149,040 135,000 140,400 200,340 624,780 4 2.65 Operating expenses were 143,000, and the company's income tax rate is 34%. Prepare comparative condensed income statements for 2017 under FIFO and average-cost. (Round per unit cost to 3 decimal places, e.g. 15.125 and final answers to 0 decimal places, e.g. 125.) LARKSPUR CO., SA Condensed Income Statement FIFO Average-cost LARKSPUR CO., SA Condensed Income Statement For the Year Ended December 31, 2017 FIFO Average-cost Sales Revenues 934,200 934,200 Cost of Goods Sold Beginning Inventory 30,100 30,100 Cost of Goods Purchased 624,780 624,780 Cost of Goods Available for Sale 654,880 654,880 Ending Inventory Cost of Goods Sold Gross Profit Operating Expenses Income before Income Taxes Income Tax Expense Net Income / (Loss) Which cost flow method (FIFO or average-cost) produces the more meaningful inventory amount for the statement of financial position? Average-cost v method produces the more meaningful inventory amount. Which cost flow method (FIFO or average-cost) is more likely to approximate actual physical flow of the goods? FIFO method is most likely to approximate actual physical flow. How much additional cash will be available for management under average-cost than under FIFO? Additional cash will be available for management
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