1. (5 points) Value of Inventory impacts COGS, Ending Inventory, Gross Profit, and Taxes a. Develop an equation to address the change in inventory value over a month. Include in your equation the following variables: a) Beginning Inventory Value, b) Inventory purchases during month, c) COGS (Cost of Goods Sold) during month, and d) Ending Inventory Value b. Test your equation with these values: a) Beginning Inventory = $500 b) Inventory purchases during month = $250 c) COGS (Cost of Goods Sold) during month = $650 d) Ending Inventory = $100 Note: Gross Profit = Revenue - COGS Taxes are applied to Gross Profit 2. (20 points) For the following transactions of a cola vendor, accomplish the tasks provided below and answer the questions. Begin the week with no inventory. a. Buy one can on Monday for 30 cents, b. A second can on Tuesday for 40 cents, c. A third can on Wednesday for 56 cents, d. A fourth can on Thursday for 68 cents, e. Sell a can on Friday for $1 Tasks: (8 points) i. Create T-accounts to track the following accounts: Inventory (balance 0), Cash (balance 10), Earnings (balance 0). Complete the five transactions (a)-(e) ii. Decide as a group the value of the inventory you sold. This will depend on which can you sold on Friday. For example, if you sold Monday's can, then your inventory will reduce by 30 cents, and this will be reflected in the inventory T-account. Questions: (12 points) i. What is your ending inventory value? Again, this will depend on which can you sold on Friday. ii. Generate a simple income statement for the week, similar to the following: Revenue $500 - COGS $200 =Gross Profit $300 iii. Assume that taxes are 35% applied to gross profit and find your after-tax profit. iv. In what circumstances would your method of inventory accounting be preferable? Here "method of inventory accounting" relates to the can you sold on Friday. For example, if you chose to sell Monday's can, then discuss in what circumstances this would be preferable. v. Under what circumstances would your method of inventory accounting be sub-ideal? assume that before you close the books, you sell the remaining inventory for $1.25 per can later on Friday. What is your new total gross profit (before tax)