FIFO method works on the principle that goods that are bought first (old products) will be sold first and LIFO follows that good that came at last will be sold first. LIFO is used by fewer companies as goods that are older are sold first which is done in FIFO method. To identify: FIFO and LIFO method.

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Answer 1

Question

Chapter 5, Problem 22QS

(a)

To determine

Introduction: FIFO method works on the principle that goods that are bought first (old products) will be sold first and LIFO follows that good that came at last will be sold first. LIFO is used by fewer companies as goods that are older are sold first which is done in FIFO method.

To identify: FIFO and LIFO method.

(b)

To determine

Introduction: The price of the inventory affects the net income which lead to tax effects. If an inventory is overvalued it will increase the profit which thereby increases the tax liability.

To identify: FIFO and LIFO method.

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[The following information applies to the questions displayed below.] At the end of January of the current year, the records of Donner Company showed the following for a particular item that sold at $17.80 per unit: Transactions Units Amount Inventory, January 1 700 $ 2,450 Purchase, January 12 670 3,685 Purchase, January 26 230 1,725 Sale (560) Sale (200) 3. Between FIFO or LIFO, which method would result in the lower income tax expense? Assume a 30 percent average tax rate. (Round your answer to 2 decimal places.)

The income statements of Cullumber Corporation show the following amounts: 2020 2019 2018 Net sales $740 $710 $660 Cost of goods sold 540 509 449 Gross profit 200 201 211 Selling, general, and administrative expenses 190 150 110 Profit before tax 10 51 101 Using vertical (common-size) analysis, analyze Cullumber Corporation’s declining profit before tax. (Round answers to 0 decimal places, e.g. 52%.) 2020 2019 2018 Net sales % % % Cost of goods sold % % % Gross profit % % % Selling, general, and administrative expenses % % % Profit before tax % % %

(d) Use the above Adjusted Trial Balance to derive the full 2020 Statement of Income (Profit& Loss) of the company. Calculate and show Gross Profit, Operating Profit, Profit beforeInterest and Tax, Profit before Tax. Calculate Net Profit = Profit before Tax – Corporate TaxExpense assuming a 30% corporate tax rate.(Consider the various expenses incl. depreciation expense as part of operating expenses,although not as part of Cost of Goods Sold. Rent Revenue is part of non-operatingactivities)

Answer 2

Question

Chapter 5, Problem 22QS

(a)

To determine

Introduction: FIFO method works on the principle that goods that are bought first (old products) will be sold first and LIFO follows that good that came at last will be sold first. LIFO is used by fewer companies as goods that are older are sold first which is done in FIFO method.

To identify: FIFO and LIFO method.

(b)

To determine

Introduction: The price of the inventory affects the net income which lead to tax effects. If an inventory is overvalued it will increase the profit which thereby increases the tax liability.

To identify: FIFO and LIFO method.

Expert Solution & Answer

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Answer 3

Question

Chapter 5, Problem 22QS

(a)

To determine

Introduction: FIFO method works on the principle that goods that are bought first (old products) will be sold first and LIFO follows that good that came at last will be sold first. LIFO is used by fewer companies as goods that are older are sold first which is done in FIFO method.

To identify: FIFO and LIFO method.

(b)

To determine

Introduction: The price of the inventory affects the net income which lead to tax effects. If an inventory is overvalued it will increase the profit which thereby increases the tax liability.

To identify: FIFO and LIFO method.

Expert Solution & Answer

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Answer 4

Question

Chapter 5, Problem 22QS

(a)

To determine

Introduction: FIFO method works on the principle that goods that are bought first (old products) will be sold first and LIFO follows that good that came at last will be sold first. LIFO is used by fewer companies as goods that are older are sold first which is done in FIFO method.

To identify: FIFO and LIFO method.

(b)

To determine

Introduction: The price of the inventory affects the net income which lead to tax effects. If an inventory is overvalued it will increase the profit which thereby increases the tax liability.

To identify: FIFO and LIFO method.

Expert Solution & Answer

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Answer 5

Chapter 5, Problem 22QS

(a)

To determine

Introduction: FIFO method works on the principle that goods that are bought first (old products) will be sold first and LIFO follows that good that came at last will be sold first. LIFO is used by fewer companies as goods that are older are sold first which is done in FIFO method.

To identify: FIFO and LIFO method.

(b)

To determine

Introduction: The price of the inventory affects the net income which lead to tax effects. If an inventory is overvalued it will increase the profit which thereby increases the tax liability.

To identify: FIFO and LIFO method.

Answer 6

Chapter 5, Problem 22QS

(a)

To determine

Introduction: FIFO method works on the principle that goods that are bought first (old products) will be sold first and LIFO follows that good that came at last will be sold first. LIFO is used by fewer companies as goods that are older are sold first which is done in FIFO method.

To identify: FIFO and LIFO method.

Answer 7

Chapter 5, Problem 22QS

(a)

To determine

Introduction: FIFO method works on the principle that goods that are bought first (old products) will be sold first and LIFO follows that good that came at last will be sold first. LIFO is used by fewer companies as goods that are older are sold first which is done in FIFO method.

To identify: FIFO and LIFO method.

Answer 8

(b)

To determine

Introduction: The price of the inventory affects the net income which lead to tax effects. If an inventory is overvalued it will increase the profit which thereby increases the tax liability.

To identify: FIFO and LIFO method.

Answer 9

(b)

To determine

Introduction: The price of the inventory affects the net income which lead to tax effects. If an inventory is overvalued it will increase the profit which thereby increases the tax liability.

To identify: FIFO and LIFO method.

Answer 10

Expert Solution & Answer

Answer 11

Expert Solution & Answer

Answer 12

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Answer 13

Ch. 5 - Prob. 1QS Ch. 5 - Prob. 2QS Ch. 5 - Prob. 3QS Ch. 5 - Prob. 4QS Ch. 5 - Perpetual: Inventory costing with FIFO P1 A...Ch. 5 - Prob. 6QS Ch. 5 - Prob. 7QS Ch. 5 - Prob. 8QS Ch. 5 - Prob. 9QS Ch. 5 - A Periodic: Inventory costing with weighted...

Introduction: The price of the inventory affects the net income which lead to tax effects. If an inventory is overvalued it will increase the profit which thereby increases the tax liability. To identify: FIFO and LIFO method.

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Chapter 5 Solutions

Introduction: The price of the inventory affects the net income which lead to tax effects. If an inventory is overvalued it will increase the profit which thereby increases the tax liability.

To identify: FIFO and LIFO method.