Question

McRay Company merchandises a single product called Bright. The following data pertain to the beginning inventory and purchases of Bright during the past year:
January 1 inventory ........ 34,000 units @ $11.00
February purchases ........ 40,000 units @ $12.00
March purchases ......... 80,000 units @ $12.40
May purchases ........... 60,000 units @ $12.60
July purchases ........... 100,000 units @ $12.80
September purchases ....... 80,000 units @ $12.60
November purchases ....... 30,000 units @ $13.00
Sales of Bright totaled 393,000 units at $20.00 per unit. Selling and administrative expenses totaled $2,551,000 for the year. McRay Company uses the periodic inventory system.

REQUIRED
1. Prepare a schedule to compute the cost of goods available for sale.
2. Compute income before income taxes under each of the following inventory cost flow assumptions:
(a) The average-cost method,
(b) The FIFO method,
(c) The LIFO method.
3. Compute inventory turnover and days’ inventory on hand under each of the inventory cost flow assumptions listed in requirement 2. What conclusion can you draw?



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  • CreatedSeptember 10, 2014
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