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At the end of January of the current year, the records of Donner Company showed the following for a particular item that sold at $15.20 per unit: Transactions Units Inventory, January 1 560 Amount $1,792 Purchase, January 12 540 2,808 Purchase, January 26 140 1,008 Sale Sale (420) (200) Required: 1a. Assuming the use of a periodic inventory system, 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. 1b. Assuming the use of a periodic inventory system, prepare a partial income statement under each method of inventory: (a) average cost, (b) FIFO, (c) LIFO, and (d) 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. 2a. Between FIFO and LIFO, which method would result in the higher pretax income? 2b. Between FIFO and LIFO, which would result in the higher EPS? 3. Between FIFO and LIFO, which method would result in the lower income tax expense? Assume a 20 percent average tax rate. 4. Between FIFO and LIFO, which method would produce the more favorable cash flow? Complete this question by entering your answers in the tabs below. Required 1A Required 1B Required 2A Required 2B Required 3 Required 4 Between FIFO and LIFO, which method would result in the lower income tax expense? Assume a 20 percent average tax rate. (Round your answer to 2 decimal places.) Method Tax Savings < Required 2B Required 4 >

At the end of January of the current year, the records of Donner Company showed the following for a particular item that sold at $15.20 per unit: Transactions Units Inventory, January 1 560 Amount $1,792 Purchase, January 12 540 2,808 Purchase, January 26 140 1,008 Sale Sale (420) (200) Required: 1a. Assuming the use of a periodic inventory system, 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. 1b. Assuming the use of a periodic inventory system, prepare a partial income statement under each method of inventory: (a) average cost, (b) FIFO, (c) LIFO, and (d) 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. 2a. Between FIFO and LIFO, which method would result in the higher pretax income? 2b. Between FIFO and LIFO, which would result in the higher EPS? 3. Between FIFO and LIFO, which method would result in the lower income tax expense? Assume a 20 percent average tax rate. 4. Between FIFO and LIFO, which method would produce the more favorable cash flow? Complete this question by entering your answers in the tabs below. Required 1A Required 1B Required 2A Required 2B Required 3 Required 4 Between FIFO and LIFO, which method would result in the lower income tax expense? Assume a 20 percent average tax rate. (Round your answer to 2 decimal places.) Method Tax Savings < Required 2B Required 4 >

College Accounting, Chapters 1-27
College Accounting, Chapters 1-27
23rd Edition
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:HEINTZ, James A.
Chapter13: Accounting For Merchandise Inventory
Section: Chapter Questions
Problem 1MP: Hurst Companys beginning inventory and purchases during the fiscal year ended December 31, 20-2,...
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At the end of January of the current year, the records of Donner Company showed the following for a particular item that sold at $15.20 per unit: Transactions Units Inventory, January 1 560 Amount $1,792 Purchase, January 12 540 Purchase, January 26 140 2,808 1,008 Sale Sale (420) (200) Required: 1a. Assuming the use of a periodic inventory system, 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. 1b. Assuming the use of a periodic inventory system, prepare a partial income statement under each method of inventory: (a) average cost, (b) FIFO, (c) LIFO, and (d) 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. 2a. Between FIFO and LIFO, which method would result in the higher pretax income? 2b. Between FIFO and LIFO, which would result in the higher EPS? 3. Between FIFO and LIFO, which method would result in the lower income tax expense? Assume a 20 percent average tax rate. 4. Between FIFO and LIFO, which method would produce the more favorable cash flow? Complete this question by entering your answers in the tabs below. Required 1A Required 1B Required 2A Required 2B Required 3 Required 4 Between FIFO and LIFO, which method would result in the lower income tax expense? Assume a 20 percent average tax rate. (Round your answer to 2 decimal places.) Method Tax Savings < Required 2B Required 4 >
Transcribed Image Text:At the end of January of the current year, the records of Donner Company showed the following for a particular item that sold at $15.20 per unit: Transactions Units Inventory, January 1 560 Amount $1,792 Purchase, January 12 540 Purchase, January 26 140 2,808 1,008 Sale Sale (420) (200) Required: 1a. Assuming the use of a periodic inventory system, 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. 1b. Assuming the use of a periodic inventory system, prepare a partial income statement under each method of inventory: (a) average cost, (b) FIFO, (c) LIFO, and (d) 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. 2a. Between FIFO and LIFO, which method would result in the higher pretax income? 2b. Between FIFO and LIFO, which would result in the higher EPS? 3. Between FIFO and LIFO, which method would result in the lower income tax expense? Assume a 20 percent average tax rate. 4. Between FIFO and LIFO, which method would produce the more favorable cash flow? Complete this question by entering your answers in the tabs below. Required 1A Required 1B Required 2A Required 2B Required 3 Required 4 Between FIFO and LIFO, which method would result in the lower income tax expense? Assume a 20 percent average tax rate. (Round your answer to 2 decimal places.) Method Tax Savings < Required 2B Required 4 >
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