Please help me Lawrence owns a small candy storethat sells one type of candy. Hisbeginning inventory of candy wasmade up of 10,000 boxes costing $1.50per box ($15,000), and he made thefollowing purchases of candy duringthe year:March 1August 15November2010,000boxesat$1.6020,000boxesat$1.7010,000boxesat$1.80$16,00034,000Cost of goods sold $18,000At the end of the year, Lawrence'sinventory consisted of 15,000 boxes ofcandy.Calculate Lawrence's cost of goods soldusing the LIFO inventory valuationmethod.

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Description: Please help me Lawrence owns a small candy storethat sells one type of candy. Hisbeginning inventory of candy wasmade up of 10,000 boxes costing $1.50per box ($15,000), and he made thefollowing purchases of candy duringthe year:March 1August 15Novemb

Using the LIFO (Last-In-First-Out) method, the most recent purchases are assumed to be sold first,…

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Lawrence owns a small candy store that sells one type of candy. His beginning inventory of candy was made up of 10,000 boxes costing $1.50 per box ($15,000), and he made the

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter6: Business Expenses

Section: Chapter Questions

Problem 37P

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Del Rio began Rio Enterprises on January 1 with 200 units of inventory. During the year, 500 additional units were purchased, 500 units were sold, and Del ended the year with 200 units. Del is very satisfied with his first year of business although the cost of replacing his inventory rose continually throughout the year. The 500 units sold for a total of 320,000 and the 500 units purchased to replace them cost 256,000, so his cash account has increased by 64,000. Del is concerned however because he has three obligations yet to meet: taxes, dividends, and his wife. Federal and state income taxes will take 40% of his income. His investors are to receive dividends equal to half of any income after taxes are paid. And finally, Del promised his wife a big trip to Hawaii if she let him quit his job as a professor and start his own business. He promised her hed make at least 50,000 after taxes. That will give us 25,000 after paying off the investors. Del kept fairly good records during the year and knows the specific cost of each inventory unit sold. He has prepared the following table to summarize his purchases and sales. Using a pencil, fill in columns F and G in the Data Section of the worksheet printout at the end of this problem.
Del Rio began Rio Enterprises on January 1 with 200 units of inventory. During the year, 500 additional units were purchased, 500 units were sold, and Del ended the year with 200 units. Del is very satisfied with his first year of business although the cost of replacing his inventory rose continually throughout the year. The 500 units sold for a total of 320,000 and the 500 units purchased to replace them cost 256,000, so his cash account has increased by 64,000. Del is concerned however because he has three obligations yet to meet: taxes, dividends, and his wife. Federal and state income taxes will take 40% of his income. His investors are to receive dividends equal to half of any income after taxes are paid. And finally, Del promised his wife a big trip to Hawaii if she let him quit his job as a professor and start his own business. He promised her hed make at least 50,000 after taxes. That will give us 25,000 after paying off the investors. Del kept fairly good records during the year and knows the specific cost of each inventory unit sold. He has prepared the following table to summarize his purchases and sales. Del has heard that the choice of an inventory cost flow assumption can have a significant effect on net income and taxes. He asks you to show him the differences between the specific identification method and the cost flow assumptions of FIFO, LIFO, and weighted average methods. Review the worksheet FIFOLIFO that follows these requirements. Note that all of the problem data have been entered in the Data Section of the worksheet.
Del Rio began Rio Enterprises on January 1 with 200 units of inventory. During the year, 500 additional units were purchased, 500 units were sold, and Del ended the year with 200 units. Del is very satisfied with his first year of business although the cost of replacing his inventory rose continually throughout the year. The 500 units sold for a total of 320,000 and the 500 units purchased to replace them cost 256,000, so his cash account has increased by 64,000. Del is concerned however because he has three obligations yet to meet: taxes, dividends, and his wife. Federal and state income taxes will take 40% of his income. His investors are to receive dividends equal to half of any income after taxes are paid. And finally, Del promised his wife a big trip to Hawaii if she let him quit his job as a professor and start his own business. He promised her hed make at least 50,000 after taxes. That will give us 25,000 after paying off the investors. Del kept fairly good records during the year and knows the specific cost of each inventory unit sold. He has prepared the following table to summarize his purchases and sales. Examine your completed worksheet and answer the following questions: a. Which inventory cost flow assumption produces the most net income? b. Which inventory cost flow assumption produces the least net income? c. What caused the difference between your answers to a and b? d. Which inventory cost flow assumption produces the highest ending cash balance? e. Which inventory cost flow assumption produces the lowest ending cash balance? f. Does the assumption that produces the highest net income also produce the highest cash balance? Explain. g. As you recall, Del originally used the specific identification method in his initial calculations when he projected 51,600 net income. According to Dels reckoning, that should have left him cash of 25,800 (50% of 51,600) after paying his investors. Why would he only have 3,800 left? Explain. h. Which inventory cost flow assumption would you suggest Del use? Explain.