value 20.00 points Mondetta Clothing prepared its annual financial statements da

Question

value 20.00 points 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 $414,000 Net Sales Cost of Goods Sold Beginning Inventory Purchases $ 43,500 270,000 Goods Available for Sale Ending Inventory (FIFO cost) 313,500 56,160 Cost of Goods Sold 257,340 Gross Profit Operating Expenses 156,660 91,500 Income from Operations Income Tax Expense (40%) 65,160 26,064 Net Income $ 39,096 Assume that you have been asked to restate the financial statements to incorporate LCM. You have developed the following data relating to the ending inventory Market Acquisition Cost Value per tem Quantity Per Unit Total Unit 2,700 1,350 6,700 2,700 $4.20 5.40 2.70 7.20 $11,340 7,290 18,090 19,440 $5.70 2.70 5.70 4.20 $56,160 Required: 1. Restate the income statement to reflect LCM valuation of the ending inventory. Apply LCM on an item- by-item basis

Explanation / Answer

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W.Note-

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MONDETTA CLOTHING Income Statement (LCM basis) For the Year Ended December 31 Sales Revenue 414000 Cost of Goods Sold: Beginning Inventory 43500 Purchases 270000 Goods Available for Sale 313500 Ending Inventory 44415 Cost of Goods Sold 269085 Gross Profit 144915 Operating Expenses 91500 Income from Operations 53415 Income Tax Expense 21366 Net Income 32049

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