(- ? ezto.mt education.com/hm.tpx 2. 25.00 points PB7-2 Evaluating the Income St

Question

(- ? ezto.mt education.com/hm.tpx 2. 25.00 points PB7-2 Evaluating the Income Statement and Income Tax Effects of Lower of Cost or Market [LO 7-4 Mondetta Clothing prepared its annual financial statements dated December 31. The company used the FIFO inventory costing method, but it failed to apply LCM to the ending inventory. The preliminary income statement follows: Net Sales Cost of Goods Sold S 430,000 Beginning Inventory Purchases $ 47,500 278,000 325,500 Ending Inventory (FIFO cost)84,000 Goods Available for Sale Cost of Goods Sold 241,500 Gross Profit Operating Expenses 188,500 95,500 Income from Operations Income Tax Expense (40%) 93,000 37,200 Net Income $ 55,800 Assume that you have been asked to restate the financial statements to incorporate LCM. You have

Explanation / Answer

1.

Working:

2.

MONDETTA CLOTHING Income Statement (LCM basis) For the Year Ended December 31 Net sales 430000 Cost of goods sold: Beginning inventory 47500 Purchases 278000 Goods available for sale 325500 Ending inventory 67375 Cost of goods sold 258125 Gross profit 171875 Operating expenses 95500 Income from operations 76375 Income tax expense 30550 Net income 45825

Related Questions

Navigate

• Browse (All)
• Browse #
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.