Right Now Electronic Center began October with 100 units of merchandise inventory that cost $70 each. During October, the store made the following purchases:
Oct. 3 35 units @ $ 82 each
12 45 units @ $ 84 each
18 75 units @ $ 90 each
Right Now uses the periodic inventory system, and the physical count at October 31indicates that 130 units of merchandise inventory are on hand.
3. Which method will result in the lowest income taxes for Right Now? Why? Whichmethod will result in the highest net income for Right Now? Why?
LIFO would result in the lowest tax expense. FIFO would result in the highest net income.
Under LIFO, the net income would be the lowest as the COGS is valued at the current prices. In the given case, the gross income under LIFO is lowest at $15,060.
So the income tax would also be the lowest under LIFO.
Under FIFO, the COGS is valued at the historical cost. So the value of COGS under this method would be the lowest, yielding the highest income.
In the given case, the gross margin under FIFO is highest at $16,950.
Assume that AB Tire Store completed the following perpetual inventory transactions for a line of tires:
May 1 Beginning merchandise inventory 16 tires @ $ 65 each
11 Purchase 10 tires @ $ 78 each
23 Sale 12 tires @ $ 88 each
26 Purchase 14 tires @ $ 80 each
29 Sale 18 tires @ $ 88 each
3. Compute cost of goods sold and gross profit using the weighted-average inventory costing method. (Round weighted-average cost per unit to the nearest cent and all other amounts to the nearest dollar.)
Question: New York Pool Supplies’s merchandise inventory data for the year ended December 31, 2019, follow:
Net Sales Revenue$ 58,000
Cost of Goods Sold:
Beginning Merchandise Inventory$ 4,900
Net Cost of Purchases 32,500
Cost of Goods Available for Sale37,400
Less: Ending Merchandise Inventory 4,700
Cost of Goods Sold32,700
Gross Profit $ 25,300
1. Assume that the ending merchandise inventory was accidentally overstated by$1,800. What are the correct amounts for cost of goods sold and gross profit?
Question: Assume that a Logan Burger restaurant has the following perpetual inventory record for hamburger patties:
Date PurchasesCost ofMerchandise
Goods SoldInventory on Hand
Jul. 9 $ 450 $ 450
22 $ 270 180
31 210 390
At July 31, the accountant for the restaurant determines that the current replacementcost of the ending merchandise inventory is $435. Make any adjusting entry needed toapply the lower-of-cost-or-market rule. Merchandise inventory would be reported onthe balance sheet at what value on July 31?
Question: Boston Cycles started October with 12 bicycles that cost $42 each. On October 16, Boston bought 40 bicycles at $68 each. On October 31, Boston sold 34 bicycles for$100 each.
Preparing a perpetual inventory record and journal entries—FIFO
1. Prepare Boston Cycle’s perpetual inventory record assuming the company uses theFIFO inventory costing method.
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