We will recommend an inventory method to our client, Angel Pharmacy. Here are the assumptions: This is the information for Drug A at Angel Pharmacy for the year 2019: Sales were 40 units @ $30 each Beginning inventory at Jan 1, 2019 was 20 units @ $10 each Purchases during the year: Mar 1, 2019 was 10 units @ $10 each Jun 1, 2019 was 5 units @ $15 each Sep 1, 2019 was 20 units @ $5 each Other assumptions for Angel Pharmacy for the year 2019: Operating expenses were $150 Income tax rate was 25% First set of Directions: Using the information above and Exhibit 9-1 and Exhibit 9-2 templates, please show the FIFO Inventory effects and the LIFO inventory effects for the Drug A at Angel Pharmacy. Please note that each of the following items in each of the FIFO and LIFO templates will be worth 6 points each: FIFO: sales, cost of sales, gross profit, operating expense, earnings before tax, income tax, and earnings after tax (7 items at 5 points each for a total of 35 points) LIFO: sales, cost of sales, gross profit, operating expense, earnings before tax, income tax, and earnings after tax (7 items at 5 points each for a total of 35 points) Second set of Directions: Using the Chapter 9 section entitled "Calculating Inventory Turnover," calculate the inventory turnover under the FIFO method and the LIFO method for Angel Pharmacy. (5 points each for a total of 10 points) Answer the following questions: 1. Which inventory method yields a higher ending inventory? (4 points) 2. Which inventory method yields a higher cost of sales? (4 points) 3. Which inventory method yields a higher earnings after tax? (4 points) 4. So which inventory method would you recommend to Angel Pharmacy and why? (8 points) We will recommend an inventory method to our client, Angel Pharmacy. Here are the assumptions: This is the information for Drug A at Angel Pharmacy for the year 2019: Sales were 40 units @ $30 each Beginning inventory at Jan 1, 2019 was 20 units @ $10 each Purchases during the year: Mar 1, 2019 was 10 units @ $10 each Jun 1, 2019 was 5 units @ $15 each Sep 1, 2019 was 20 units @ $5 each Other assumptions for Angel Pharmacy for the year 2019: Operating expenses were $150 Income tax rate was 25% First set of Directions: Using the information above and Exhibit 9-1 and Exhibit 9-2 templates, please show the FIFO Inventory effects and the LIFO inventory effects for the Drug A at Angel Pharmacy. Please note that each of the following items in each of the FIFO and LIFO templates will be worth 6 points each: FIFO: sales, cost of sales, gross profit, operating expense, earnings before tax, income tax, and earnings after tax (7 items at 5 points each for a total of 35 points) LIFO: sales, cost of sales, gross profit, operating expense, earnings before tax, income tax, and earnings after tax (7 items at 5 points each for a total of 35 points) Second set of Directions: Using the Chapter 9 section entitled "Calculating Inventory Turnover," calculate the inventory turnover under the FIFO method and the LIFO method for Angel Pharmacy. (5 points each for a total of 10 points) Answer the following questions: 1. Which inventory method yields a higher ending inventory? (4 points) 2. Which inventory method yields a higher cost of sales? (4 points) 3. Which inventory method yields a higher earnings after tax? (4 points) 4. So which inventory method would you recommend to Angel Pharmacy and why? (8 points)
