Cf unit4 p7-3 evaluating four alternative inventory methods based on

P7-3 Evaluating Four Alternative Inventory Methods Based on Income and Cash Flow LO7-2, 7-3

 

CF unit4 P7-3 Evaluating Four Alternative Inventory Methods Based on Income and Cash Flow LO7-2, 7-3

 

At the end of January 2014, the records of Donner Company showed the following for a particular item that sold at $16 per unit:

Transactions

Units

Amount

 

  Inventory, January 1, 2014

500

$   2,365

4.73

  Purchase, January 12

600

3,600

6

  Purchase, January 26

160

1,280

8

  Sale

(370)

   

  Sale

(250)

   

 

Required:

1a. Compute Cost of Goods Sold under each method of inventory: average cost, FIFO, LIFO, and specific identification. For specific  identification, assume that the first sale was selected from the beginning inventory and the second sale was selected from the January 12 purchase. (Round unit price to 2 decimal places. Input all amounts as positive values.) Input areas are shaded.

 

Average Cost

Cost of Good Available for Sale

Cost of Goods Sold

 

# of Units

Cost per Unit

Cost of Goods Available for Sale

# of Units Sold

Cost per Unit

Cost of Goods Sold

Beginning inventory

 

 

 

 

 

 

Purchases:

 

 

 

 

 

 

January 12, 2014

 

 

 

 

 

 

January 26, 2014

 

 

 

 

 

 

Total

  

 

  

 

  

  

 

FIFO

Cost of Goods Available for Sale

Cost of Goods Sold

 

# of Units

Cost per Unit

Cost of Goods Available for Sale

# of Units Sold

Cost per Unit

Cost of Goods Sold

Beginning inventory

 

 

$0

 

 

 

Purchases:

 

 

 

 

 

 

January 12, 2014

 

 

$0

 

 

 

January 26, 2014

 

 

$0

 

 

 

Total

               

 

$0

0

 

  

 

LIFO

Cost of Goods Available for Sale

Cost of Goods Sold

 

# of Units

Cost per Unit

Cost of Goods Available for Sale

# of Units Sold

Cost per Unit

Cost of Goods Sold

Beginning inventory

 

  

  

 

 

  

Purchases:

 

 

 

 

 

 

January 12, 2014

 

  

  

 

 

  

January 26, 2014

 

  

  

 

 

  

Total

              

 

 $     

0

 

 $4,040

 

Specific Identification

Cost of Goods Available for Sale

Cost of Goods Sold

 

# of Units

Cost per Unit

Cost of Goods Available for Sale

# of Units Sold

Cost per Unit

Cost of Goods Sold

Beginning inventory

 

  

  

 

 

  

Purchases:

 

 

 

 

 

 

January 12, 2014

 

  

  

 

 

  

January 26, 2014

 

  

  

 

 

  

Total

      

 

 $               

0

 

  

 

Required:

2a. FIFO and LIFO, which method would result in the higher pretax income?

 

2b. FIFO and LIFO, which would result in the higher EPS?

 

3 FIFO and LIFO, which method would result in the lower income tax expense? Assume a 30 percent average tax rate.

 

4 FIFO and LIFO, which method would produce the more favorable cash flow?

 

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