CF Unit4 P7-3 At the end of January 2014, the records of Donner Company

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CF Unit4 P7-3 Evaluating Four
 
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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    CF Unit4 P7-3 At the end of January 2014, the records of Donner Company
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