Asked by Cydney Adger on Jun 08, 2024
Verified
Determine the difference in the amount of income that the company would have reported if it had used the FIFO method instead of the LIFO method. Would income have been greater or less?
FIFO
"First In, First Out," a method used in inventory management and accounting where the oldest inventory items are sold or used first.
Net Income
Signifies the net income of a corporation following the subtraction of all costs and tax obligations from the overall revenue.
- Gain insight into the influence of inventory procedures (FIFO, LIFO, Weighted Average, and Specific Identification) on the presentation of financial statements.
- Examine how alterations in inventory valuation practices impact tax liabilities, net profits, and organizational cash flow.
Verified Answer
CD
Cody DaffinsonJun 15, 2024
Final Answer :
1. FIFO: Ending inventory $3,660\$ 3,660$3,660
300 units @$8=$2,400180 units @$7480 units =1,260$3,660\begin{array}{lll}300 \text { units } @ \$ 8 & = & \$ 2,400 \\\frac{180 \text { units } @ \$ 7}{480 \text { units }} & = & \frac{1,260}{\$ 3,660}\end{array}300 units @$8480 units 180 units @$7==$2,400$3,6601,260
2. Average Cost: Ending inventory $3,216\$ 3,216$3,216
$6,700÷1,000=$6.70\$ 6,700 \div 1,000 = \$ 6.70$6,700÷1,000=$6.70 per unit ×480\times 480×480 units =$3.216‾‾= \underline { \underline { \$ 3.216 } }=$3.216 Income would have been $880 ($3920 vs. $3040) greater if the company used FIFO instead of LIFO.
300 units @$8=$2,400180 units @$7480 units =1,260$3,660\begin{array}{lll}300 \text { units } @ \$ 8 & = & \$ 2,400 \\\frac{180 \text { units } @ \$ 7}{480 \text { units }} & = & \frac{1,260}{\$ 3,660}\end{array}300 units @$8480 units 180 units @$7==$2,400$3,6601,260
2. Average Cost: Ending inventory $3,216\$ 3,216$3,216
$6,700÷1,000=$6.70\$ 6,700 \div 1,000 = \$ 6.70$6,700÷1,000=$6.70 per unit ×480\times 480×480 units =$3.216‾‾= \underline { \underline { \$ 3.216 } }=$3.216 Income would have been $880 ($3920 vs. $3040) greater if the company used FIFO instead of LIFO.
Learning Objectives
- Gain insight into the influence of inventory procedures (FIFO, LIFO, Weighted Average, and Specific Identification) on the presentation of financial statements.
- Examine how alterations in inventory valuation practices impact tax liabilities, net profits, and organizational cash flow.
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