Maurice Tutor

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Teaching Since: May 2017
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  • MCS,PHD
    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 26 Sep 2017 My Price 10.00

Spice, Inc.

Spice, Inc., began October with 100 shirts that cost $76 each. During October, the store made the following purchases at cost:

Oct. 3

200 @ $81

=

$16,200

12

90 @ 82

=

7,380

24

240 @ 85

=

20,400

Spice sold 500 shirts and ended October with 130 shirts. The sale price of each shirt was $130.

Required

1. Determine the cost of goods sold and ending inventory amounts by the average, FIFO, and LIFO cost methods. Round average cost per unit to 3 decimal places, and round all other amounts to the nearest dollar.

2. Explain why cost of goods sold is highest under LIFO. Be specific.

3. Prepare Spice’s income statement for October. Report gross profit. Operating expenses totaled $10,000. Spice uses the LIFO method for inventory. The income tax rate is 40%.

Inventory

 

Jan. 1

Balance

300 cases @ $300

121,500
   

100 cases @ 315

  

May 19

Purchase

600 cases @ 335

201,000

Aug.12

Purchase

400 cases @ 350

140,000

Oct.4

Purchase

700 cases @ 370

259,000

 

Sales Revenue

Dec. 31

1,800 cases

910,000

Required

1. Prepare a partial income statement through gross profit under the average, FIFO, and LIFO cost methods. Round average cost per unit to 4 decimal places and all other amounts to the nearest dollar.

2. Which inventory method would you use to report the highest net income? Explain why this method produces the highest reported income.

Answers

Maurice Tutor
(5)
Status NEW Posted 26 Sep 2017 06:09 PM My Price 10.00

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