6. Inventory Concepts. Answer the questions. a. Which inventory cost flow assump
ID: 2365393 • Letter: 6
Question
6. Inventory Concepts. Answer the questions.
a. Which inventory cost flow assumption uses the most current costs for the ending inventory (and
Balance Sheet)?
b. Which inventory cost flow assumption uses the most current costs for cost of goods sold (and
Income Statement?
c. Which inventory cost flow assumption assumes all units have the same cost?
d. In periods of rising prices (inflation), which cost flow assumption produces the:
(1) Highest net income?
(2) Highest cost of goods sold?
(3) Lowest gross profit?
(4) Lowest cost of goods sold?
(5) Highest gross profit?
(6) Lowest net income?
Explanation / Answer
From the given table, Case-A: Cost of goods available for sale = Beginning inventory + Purchases = $12,000 + $70,000 = $82,000 Cost of goods sold = Cost of goods available for sale - Ending inventory Ending inventory = Cost of goods available for sale - Cost of goods sold = $82,000 - $60,300 = $18,900 Gross profit = Sales - Cost of goods sold = $90,150 - $60,300 = $29,850 Case-B: Cost of goods available for sale = Beginning inventory + Purchases = $22,000 + $84,000 = $106,000 Cost of goods sold = Cost of goods available for sale - Ending inventory = $106,000 - $17,500 = $88,500 Gross profit = Sales - Cost of goods sold = $139,800 - $88,500 = $51,300 Case-C: Cost of goods sold = Cost of goods available for sale - Ending inventory Cost of goods available for sale = Cost of goods sold + Ending inventory = $375,200 + $17,800 = $393,000 Cost of goods available for sale = Beginning inventory + Purchases Purchases = Cost of goods available for sale - Beginning inventory = $393,000 - $153,000 = $240,000 Sales - Cost of goods sold = Gross profit Sales = Cost of goods sold + Gross profit = $375,200 + $245,700 = $620,900 Case-D: Cost of goods sold = Cost of goods available for sale - Ending inventory Cost of goods available for sale = Cost of goods sold + Ending inventory = $69,650+ $5,350 = $75,000 Cost of goods available for sale = Beginning inventory + Purchases Beginning inventory = Cost of goods available for sale - Purchases = $75,000 - $62,000 = $13,000 Gross profit = Sales - Cost of goods sold = $120,900 - $69,650 = $51,250 Case-E: Cost of goods available for sale = Beginning inventory + Purchases = $17,500 + $93,000 = $110,500 Cost of goods sold = Sales - Gross profit = $140,000 - $57,500 = $82,500 Cost of goods sold = Cost of goods available for sale - Ending inventory Ending inventory = Cost of goods available for sale - Cost of goods sold = $110,500 - $82,500 = $28,000 a) FIFO uses the most recent current costs for the ending inventory b) LIFO is just the reverse of FIFO as it uses the most recent current costs for Cost of goods sold. c) Weighted average cost assumes that all units have the same cost. d) 1) FIFO produces highest net income 2) LIFO produces highest cost of goods sold 3) LIFO gives lowest gross profit 4) FIFO produces lowest cost of goods sold 5) FIFO gives highest gross profit 6) LIFO gives lowest net income = $22,000 + $84,000 = $106,000 Cost of goods sold = Cost of goods available for sale - Ending inventory Cost of goods sold = Cost of goods available for sale - Ending inventory = $106,000 - $17,500 = $88,500 Gross profit = Sales - Cost of goods sold = $139,800 - $88,500 = $51,300 Case-C: Cost of goods sold = Cost of goods available for sale - Ending inventory Cost of goods available for sale = Cost of goods sold + Ending inventory = $375,200 + $17,800 = $393,000 Cost of goods available for sale = Beginning inventory + Purchases Purchases = Cost of goods available for sale - Beginning inventory = $393,000 - $153,000 = $240,000 Sales - Cost of goods sold = Gross profit Sales = Cost of goods sold + Gross profit = $375,200 + $245,700 = $620,900 Case-D: Cost of goods sold = Cost of goods available for sale - Ending inventory Cost of goods available for sale = Cost of goods sold + Ending inventory = $69,650+ $5,350 = $75,000 Cost of goods available for sale = Beginning inventory + Purchases Beginning inventory = Cost of goods available for sale - Purchases = $75,000 - $62,000 = $13,000 Gross profit = Sales - Cost of goods sold = $120,900 - $69,650 = $51,250 Case-E: Cost of goods available for sale = Beginning inventory + Purchases = $17,500 + $93,000 = $110,500 Cost of goods sold = Sales - Gross profit = $140,000 - $57,500 = $82,500 Cost of goods sold = Cost of goods available for sale - Ending inventory Ending inventory = Cost of goods available for sale - Cost of goods sold = $110,500 - $82,500 = $28,000 a) FIFO uses the most recent current costs for the ending inventory b) LIFO is just the reverse of FIFO as it uses the most recent current costs for Cost of goods sold. c) Weighted average cost assumes that all units have the same cost. d) 1) FIFO produces highest net income 2) LIFO produces highest cost of goods sold 3) LIFO gives lowest gross profit 4) FIFO produces lowest cost of goods sold 5) FIFO gives highest gross profit 6) LIFO gives lowest net income Gross profit = Sales - Cost of goods sold = $139,800 - $88,500 = $51,300 Case-C: Cost of goods sold = Cost of goods available for sale - Ending inventory Cost of goods sold = Cost of goods available for sale - Ending inventory Cost of goods available for sale = Cost of goods sold + Ending inventory = $375,200 + $17,800 = $393,000 Cost of goods available for sale = Beginning inventory + Purchases Purchases = Cost of goods available for sale - Beginning inventory = $393,000 - $153,000 = $240,000 Sales - Cost of goods sold = Gross profit Sales = Cost of goods sold + Gross profit = $375,200 + $245,700 = $620,900 Case-D: Cost of goods sold = Cost of goods available for sale - Ending inventory Cost of goods available for sale = Cost of goods sold + Ending inventory = $69,650+ $5,350 = $75,000 Cost of goods available for sale = Beginning inventory + Purchases Beginning inventory = Cost of goods available for sale - Purchases = $75,000 - $62,000 = $13,000 Gross profit = Sales - Cost of goods sold = $120,900 - $69,650 = $51,250 Case-E: Cost of goods available for sale = Beginning inventory + Purchases = $17,500 + $93,000 = $110,500 Cost of goods sold = Sales - Gross profit = $140,000 - $57,500 = $82,500 Cost of goods sold = Cost of goods available for sale - Ending inventory Ending inventory = Cost of goods available for sale - Cost of goods sold = $110,500 - $82,500 = $28,000 a) FIFO uses the most recent current costs for the ending inventory b) LIFO is just the reverse of FIFO as it uses the most recent current costs for Cost of goods sold. c) Weighted average cost assumes that all units have the same cost. d) 1) FIFO produces highest net income 2) LIFO produces highest cost of goods sold 3) LIFO gives lowest gross profit 4) FIFO produces lowest cost of goods sold 5) FIFO gives highest gross profit 6) LIFO gives lowest net income Purchases = Cost of goods available for sale - Beginning inventory = $393,000 - $153,000 = $240,000 Sales - Cost of goods sold = Gross profit Sales = Cost of goods sold + Gross profit = $375,200 + $245,700 = $620,900 Case-D: Cost of goods sold = Cost of goods available for sale - Ending inventory Cost of goods available for sale = Cost of goods sold + Ending inventory = $69,650+ $5,350 = $75,000 Cost of goods available for sale = Beginning inventory + Purchases Beginning inventory = Cost of goods available for sale - Purchases = $75,000 - $62,000 = $13,000 Gross profit = Sales - Cost of goods sold = $120,900 - $69,650 = $51,250 Case-E: Cost of goods available for sale = Beginning inventory + Purchases = $17,500 + $93,000 = $110,500 Cost of goods sold = Sales - Gross profit = $140,000 - $57,500 = $82,500 Cost of goods sold = Cost of goods available for sale - Ending inventory Ending inventory = Cost of goods available for sale - Cost of goods sold = $110,500 - $82,500 = $28,000 a) FIFO uses the most recent current costs for the ending inventory b) LIFO is just the reverse of FIFO as it uses the most recent current costs for Cost of goods sold. c) Weighted average cost assumes that all units have the same cost. d) 1) FIFO produces highest net income 2) LIFO produces highest cost of goods sold 3) LIFO gives lowest gross profit 4) FIFO produces lowest cost of goods sold 5) FIFO gives highest gross profit 6) LIFO gives lowest net income Cost of goods sold = Cost of goods available for sale - Ending inventory Cost of goods available for sale = Cost of goods sold + Ending inventory = $69,650+ $5,350 = $75,000 Cost of goods available for sale = Beginning inventory + Purchases Beginning inventory = Cost of goods available for sale - Purchases = $75,000 - $62,000 = $13,000 Gross profit = Sales - Cost of goods sold = $120,900 - $69,650 = $51,250 Case-E: Cost of goods available for sale = Beginning inventory + Purchases = $17,500 + $93,000 = $110,500 Cost of goods sold = Sales - Gross profit = $140,000 - $57,500 = $82,500 Cost of goods sold = Cost of goods available for sale - Ending inventory Ending inventory = Cost of goods available for sale - Cost of goods sold = $110,500 - $82,500 = $28,000 a) FIFO uses the most recent current costs for the ending inventory b) LIFO is just the reverse of FIFO as it uses the most recent current costs for Cost of goods sold. c) Weighted average cost assumes that all units have the same cost. d) 1) FIFO produces highest net income 2) LIFO produces highest cost of goods sold 3) LIFO gives lowest gross profit 4) FIFO produces lowest cost of goods sold 5) FIFO gives highest gross profit 6) LIFO gives lowest net income Beginning inventory = Cost of goods available for sale - Purchases = $75,000 - $62,000 = $13,000 Gross profit = Sales - Cost of goods sold = $120,900 - $69,650 = $51,250 Case-E: Cost of goods available for sale = Beginning inventory + Purchases = $17,500 + $93,000 = $110,500 Cost of goods sold = Sales - Gross profit = $140,000 - $57,500 = $82,500 Cost of goods sold = Cost of goods available for sale - Ending inventory Ending inventory = Cost of goods available for sale - Cost of goods sold = $110,500 - $82,500 = $28,000 a) FIFO uses the most recent current costs for the ending inventory b) LIFO is just the reverse of FIFO as it uses the most recent current costs for Cost of goods sold. c) Weighted average cost assumes that all units have the same cost. d) 1) FIFO produces highest net income 2) LIFO produces highest cost of goods sold 3) LIFO gives lowest gross profit 4) FIFO produces lowest cost of goods sold 5) FIFO gives highest gross profit 6) LIFO gives lowest net income Gross profit = Sales - Cost of goods sold = $120,900 - $69,650 = $51,250 Case-E: Cost of goods available for sale = Beginning inventory + Purchases = $17,500 + $93,000 = $110,500 Cost of goods sold = Sales - Gross profit = $140,000 - $57,500 = $82,500 Cost of goods sold = Cost of goods available for sale - Ending inventory Ending inventory = Cost of goods available for sale - Cost of goods sold = $110,500 - $82,500 = $28,000 a) FIFO uses the most recent current costs for the ending inventory b) LIFO is just the reverse of FIFO as it uses the most recent current costs for Cost of goods sold. c) Weighted average cost assumes that all units have the same cost. d) 1) FIFO produces highest net income 2) LIFO produces highest cost of goods sold 3) LIFO gives lowest gross profit 4) FIFO produces lowest cost of goods sold 5) FIFO gives highest gross profit 6) LIFO gives lowest net income Gross profit = Sales - Cost of goods sold = $120,900 - $69,650 = $51,250 Case-E: Cost of goods available for sale = Beginning inventory + Purchases = $17,500 + $93,000 = $110,500 Cost of goods sold = Sales - Gross profit = $140,000 - $57,500 = $82,500 Cost of goods sold = Cost of goods available for sale - Ending inventory Ending inventory = Cost of goods available for sale - Cost of goods sold = $110,500 - $82,500 = $28,000 a) FIFO uses the most recent current costs for the ending inventory b) LIFO is just the reverse of FIFO as it uses the most recent current costs for Cost of goods sold. c) Weighted average cost assumes that all units have the same cost. d) 1) FIFO produces highest net income 2) LIFO produces highest cost of goods sold 3) LIFO gives lowest gross profit 4) FIFO produces lowest cost of goods sold 5) FIFO gives highest gross profit 6) LIFO gives lowest net income = $17,500 + $93,000 = $110,500 Cost of goods sold = Sales - Gross profit = $140,000 - $57,500 = $82,500 Cost of goods sold = Cost of goods available for sale - Ending inventory Cost of goods sold = Cost of goods available for sale - Ending inventory Ending inventory = Cost of goods available for sale - Cost of goods sold = $110,500 - $82,500 = $28,000 a) FIFO uses the most recent current costs for the ending inventory b) LIFO is just the reverse of FIFO as it uses the most recent current costs for Cost of goods sold. c) Weighted average cost assumes that all units have the same cost. d) 1) FIFO produces highest net income 2) LIFO produces highest cost of goods sold 3) LIFO gives lowest gross profit 4) FIFO produces lowest cost of goods sold 5) FIFO gives highest gross profit 6) LIFO gives lowest net incomeRelated Questions
Hire Me For All Your Tutoring Needs
Integrity-first tutoring: clear explanations, guidance, and feedback.
Drop an Email at
drjack9650@gmail.com
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.