The accounting records of Allen Insulation, Inc. reflected the following balance

Question

The accounting records of Allen Insulation, Inc. reflected the following balances as of January 1, 20xx:

The following transactions occurred in 20XX:

January 30th Purchase (cash) 130 units @ $124

March 12th Purchase (cash)    220 units @$128

June 3rd Sale (cash)                 350 units @$320

Paid $24,000 of operating expenses.

Paid cash for income tax at the rate of 40 percent of income before tax.

Compute the cost of goods sold, ending inventory, gross profit, income tax expense and net profit assuming:

FIFO cost flow

LIFO cost flow

Weighted-average cost flow

Units Per unit cost Beginning Inventory 200 $      120.00 $   24,000.00 30-Jan purchase 130 $      124.00 $   16,120.00 12-Mar purchase 220 $      128.00 $   28,160.00 Total Sales 350 $      320.00 $ 112,000.00 Ending Inventory FIFO LIFO Ending Inventory Ending Inventory Goods Available for Sale Goods Available for Sale Deduct ending Inventory Deduct ending Inventory Cost of Goods Sold Cost of Goods Sold Sales Sales Cost of Goods Sold Cost of Goods Sold Gross Profit Gross Profit Operating Expense $ 24,000.00 Operating Expense $ 24,000.00 Operating Income before tax Operating Income before tax Income Tax 40% Income Tax 40% Net Profit Net Profit Weighted Average Average Cost Ending Inventory Goods Available for Sale Deduct ending Inventory Cost of Goods Sold Sales Cost of Goods Sold Gross Profit Operating Expense $ 24,000.00 Operating Income before tax Income Tax 40% Net Profit

Explanation / Answer

FIFO Method Date Description Qty Rate Amt. Opening Inventory 200 120                 24,000 Jan-30 Purchase 130 124                 16,120 Mar-12 Purchase 220 128                 28,160 Total Goods Avilable 550                 68,280 Less: Sales 200 120                 24,000 130 124                 16,120 20 128                    2,560 Cost of Goods Sold 350                 42,680 Ending Inventory 200                 25,600 Income Statement Sale (350*320)                  112,000 Less: Cost of Goods Sold                    42,680 Gross Profit                    69,320 Operating Expenses                    24,000 Income Before tax                    45,320 Income tax                    18,128 Net Profit                    27,192 LIFO Method Date Description Qty Rate Amt. Opening Inventory 200 120                 24,000 Jan-30 Purchase 130 124                 16,120 Mar-12 Purchase 220 128                 28,160 Total Goods Avilable 550                 68,280 Less: Sales 220 128                 28,160 130 124                 16,120 Cost of Goods Sold 350                 44,280 Ending Inventory 200                 24,000 Income Statement Sale (350*320)                  112,000 Less: Cost of Goods Sold                    44,280 Gross Profit                    67,720 Operating Expenses                    24,000 Income Before tax                    43,720 Income tax                    17,488 Net Profit                    26,232 Weighted Average Date Description Qty Rate Amt. Opening Inventory 200 120                 24,000 Jan-30 Purchase 130 124                 16,120 Mar-12 Purchase 220 128                 28,160 Total Goods Avilable 550                    124.15                 68,280 Less: Sales 350                    124.15                 43,451 Cost of Goods Sold 350                 43,451 Ending Inventory 200                 24,829 Income Statement Sale (350*320)                  112,000 Less: Cost of Goods Sold                    43,451 Gross Profit                    68,549 Operating Expenses                    24,000 Income Before tax                    44,549 Income tax                    17,820 Net Profit                    26,729

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