Dominick Portet Wines Inc. began operations to import fine wines from Australia to the United States. Sales and purchase information is provided below. Year 1 Year 2 Year 3 Units $ Units $ Units $ Sales 340 440 600 Purchases 500 @ $10 400 @ $8 ? @ 15 LIFO ending inventory 160 @ $10 120 @ $10 Assume that Portet Wines uses the LIFO method of inventory valuation. The purchase amount for Year 3 has been left blank because Portet Wines has not yet decided the total number of units to purchase during the year. (Assume that all sales occur on the last day of the year, after all purchases for the year have been made. The company's year-end is December 31.) Required How many units should be purchased in Year 3 if the firm's objective is to maximize reported income for the year? Answer Compute the cost of goods sold for Year 3 assuming the number of units computed in (1) is purchased. $Answer How many units should be purchased in Year 3 if the firm's objective is to minimize income taxes for the year? Answer
Dominick Portet Wines Inc. began operations to import fine wines from Australia to the United States. Sales and purchase information is provided below. Year 1 Year 2 Year 3 Units $ Units $ Units $ Sales 340 440 600 Purchases 500 @ $10 400 @ $8 ? @ 15 LIFO ending inventory 160 @ $10 120 @ $10 Assume that Portet Wines uses the LIFO method of inventory valuation. The purchase amount for Year 3 has been left blank because Portet Wines has not yet decided the total number of units to purchase during the year. (Assume that all sales occur on the last day of the year, after all purchases for the year have been made. The company's year-end is December 31.) Required How many units should be purchased in Year 3 if the firm's objective is to maximize reported income for the year? Answer Compute the cost of goods sold for Year 3 assuming the number of units computed in (1) is purchased. $Answer How many units should be purchased in Year 3 if the firm's objective is to minimize income taxes for the year? Answer
Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN:9781285595047
Author:Weil
Publisher:Weil
Chapter9: Working Capital
Section: Chapter Questions
Problem 18E
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Dominick Portet Wines Inc. began operations to import fine wines from Australia to the United States. Sales and purchase information is provided below.
Year 1 | Year 2 | Year 3 | |||||||
---|---|---|---|---|---|---|---|---|---|
Units | $ | Units | $ | Units | $ | ||||
Sales | 340 | 440 | 600 | ||||||
Purchases | 500 | @ | $10 | 400 | @ | $8 | ? | @ | 15 |
LIFO ending inventory | 160 | @ | $10 | 120 | @ | $10 |
Assume that Portet Wines uses the LIFO method of inventory valuation. The purchase amount for Year 3 has been left blank because Portet Wines has not yet decided the total number of units to purchase during the year. (Assume that all sales occur on the last day of the year, after all purchases for the year have been made. The company's year-end is December 31.)
Required
- How many units should be purchased in Year 3 if the firm's objective is to maximize reported income for the year?
Answer - Compute the cost of goods sold for Year 3 assuming the number of units computed in (1) is purchased.
$Answer - How many units should be purchased in Year 3 if the firm's objective is to minimize income taxes for the year?
Answer - Compute the cost of goods sold for Year 3 assuming the number of units computed in (3) is purchased.
$Answer - Assume Portet Wines uses FIFO instead of LIFO and the company purchased just enough units to meet sales demand. What would the cost of goods sold be in Year 3?
Assume that FIFO ending inventory is equal to 160 units at $10 in Year 1 and 120 units at $8 in Year 2.
$Answer
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