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The management of Windsor, Inc. is reevaluating the appropriateness of using its present inventory cost flow method, which is average cost. The company requests your
The management of Windsor, Inc. is reevaluating the appropriateness of using its present inventory cost flow method, which is average cost. The company requests your help in determining the results of operations for 2020 if either the FIFO or the LIFO method had been used. For 2020, the accounting records show these data: Inventories Beginning (12,600 units) Ending (30,600 units) $1,344,600 Purchases and Sales Total net sales (324,000 units) Total cost of goods purchased ( 342,000 units) $25,200 838,800 Purchases were made quarterly as follows. Quarter Units Unit Cost Total Cost 1 90.000 $2.20 $198.000 2 72,000 235 169,200 3 72.000 250 180,000 108.000 270 291,600 342.000 $838.800 Operating expenses were $ 130,000, and the company sincome tax rate is 40% Prepare comparative condensed income statements for 2020 under FIFO and LIFO. Windsor, Inc. Condensed Income Statements FIFO LIFO $ $ > A tA > A > > > > (1) Which cost flow method (FIFO or LIFO) produces the more meaningful inventory amount for the balance sheet? > (2) (3) Which cost flow method (FIFO or LIFO) produces the more meaningful net income? Which cost flow method (FIFO or LIFO) is more likely to approximate the actual physical flow of goods? How much more cash will be available for management under LIFO than under FIFO? $ (4) (5) Will gross profit under the average-cost method be higher or lower than FIFO? Will gross profit under the average cost method be higher or lower than LIFO
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