CF unit4 P7-3 Evaluating Four Alternative Inventory Methods Based on Income and Cash Flow LO7-2, 7-3

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CF unit4 P7-3 Evaluating Four Alternative Inventory Methods Based on Income and Cash Flow LO7-2, 7-3

Question # 00104607 Posted By: john Updated on: 09/19/2015 08:32 AM Due on: 09/24/2015

Subject Accounting Topic Accounting Tutorials:

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P7-3 Evaluating Four Alternative Inventory Methods Based on Income and Cash Flow LO7-2, 7-3

CF unit4 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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score 3 · Accepted Answer · 09/19/2015 08:34 AM

Solution: CF unit4 P7-3 Evaluating Four Alternative Inventory Methods Based on Income and Cash Flow LO7-2, 7-3

Tutorial # 00098996 Posted By: john Posted on: 09/19/2015 08:34 AM

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CF unit4 P7-3 Evaluating Four Alternative Inventory Methods Based on Income and Cash Flow LO7-2, 7-3

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