Assume that a firm separately determined inventory under FIFO and LIFO and then compared the results. a. In each space that follows, place the correct sign [less than (<), greater than (>), or equal (=)] for each comparison, assuming periods of rising prices. 1. FIFO inventory LIFO inventory 2. FIFO cost of merchandise sold LIFO cost of merchandise sold 3. FIFO net income LIFO net income 4. FIFO income taxes LIFO income taxes b. Why would management prefer to use LIFO over FIFO in periods of rising prices?

Assume that a firm separately determined inventory under FIFO and LIFO and then compared the results. a. In each space that follows, place the correct sign [less than (<), greater than (>), or equal (=)] for each comparison, assuming periods of rising prices. 1. FIFO inventory LIFO inventory 2. FIFO cost of merchandise sold LIFO cost of merchandise sold 3. FIFO net income LIFO net income 4. FIFO income taxes LIFO income taxes b. Why would management prefer to use LIFO over FIFO in periods of rising prices?

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter6: Cost Of Goods Sold And Inventory

Section: Chapter Questions

Problem 26CE: Lower of Cost or Market The accountant for Murphy Company prepared the following analysis of its...

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Use the weighted-average (AVG) cost allocation method, with perpetual inventory updating, to calculate (a) sales revenue, (b) cost of goods sold, and c) gross margin for A75 Company, considering the following transactions.
Use the last-in, first-out (LIFO) cost allocation method, with perpetual inventory updating, to calculate (a) sales revenue, (b) cost of goods sold, and c) gross margin for A75 Company, considering the following transactions.
Calculate a) cost of goods sold, b) ending inventory, and c) gross margin for A76 Company, considering the following transactions under three different cost allocation methods and using perpetual inventory updating. Provide calculations for weighted average (AVG).
Use the first-in, first-out (FIFO) cost allocation method, with perpetual inventory updating, to calculate (a) sales revenue, (b) cost of goods sold, and c) gross margin for A75 Company, considering the following transactions.
Calculate a) cost of goods sold, b) ending inventory, and c) gross margin for A76 Company, considering the following transactions under three different cost allocation methods and using perpetual inventory updating. Provide calculations for first-in, first-out (FIFO).
Retail Inventory Method The following information relates to the retail inventory method used by Jeffress Company: Required: 1. Compute the ending inventory by the retail inventory method using the following cost flow' assumptions (round the cost-to-retail ratio to 3 decimal places): a. FIFO b. average cost c. LIFO d. lower of cost or market (based on average cost) 2. Next Level What assumptions are necessary for the retail inventory method to produce accurate estimates of ending inventory?
Using the following data, how should the inventory be valued under lower of cost or market? Original cost 1,350 Estimated selling price 1,475 Selling expenses 180
Using the following data, how should the inventory be valued under lower of cost or market? Original cost 1,350 Estimated selling price 1,475 Selling expenses 180
Inventory Valuation Specific identification method Weighted average cost method FIFO method LIFO method LIFO liquidation LIFO conformity rule LIFO reserve Replacement cost Inventory profit Lower-of-cost-or-market (LCM) rule Inventory turnover ratio Number of days sales in inventory Moving average (Appendix) The name given to an average cost method when a weighted average cost assumption is used with a perpetual inventory system. An inventory costing method that assigns the same unit cost to all units available for sale during the period. A conservative inventory valuation approach that is an attempt to anticipate declines in the value of inventory before its actual sale. An inventory costing method that assigns the most recent costs to ending inventory. The current cost of a unit of inventory. An inventory costing method that assigns the most recent costs to cost of goods sold. A measure of how long it takes to sell inventory. The IRS requirement that when LIFO is used on a tax return, it must also be used in reporting income to stockholders. An inventory costing method that relies on matching unit costs with the actual units sold. The portion of the gross profit that results from holding inventory during a period of rising prices. The result of selling more units than are purchased during the period, which can have negative tax consequences if a company is using LIFO. The excess of the value of a companys inventory stated at FIFO over the value stated at LIFO. A measure of the number of times inventory is sold during the period.
Perpetual and Periodic Inventory Systems Below is a list of inventory systems options. a. Perpetual inventory system b. Periodic inventory system c. Both perpetual and periodic inventory systems Required: Match each option with one of the following: 1. Only revenue is recorded as sales are made during the period; the cost of goods sold is recorded at the end of the period. 2. Cost of goods sold is determined as each sale is made. 3. Inventory purchases are recorded in an inventory account. 4. Inventory purchases are recorded in a purchases account. 5. Cost of goods sold is determined only at the end of the period by subtracting the cost of ending inventory from the cost of goods available for sale. 6. Both revenue and cost of goods sold are recorded during the period as sales are made. 7. The inventory is verified by a physical count.
When the double-extension approach to the dollar-value LIFO inventory cost flow method is used, the inventory layer added in the current year is multiplied by an index number. How would the following be used in the calculation of this index number?
Compare the calculations for gross margin for B76 Company, based on the results of the perpetual inventory calculations using FIFO, LIFO, and AVG.