Orion Iron Corp. tracks the number of units purchased and sold throughout each year but applies its
Question:
Transactions Units Unit Cost
a. Inventory, December 31, 2011................................... 300................. $12
For the year 2012:
b. Purchase, April 11................................................. 900..................10
c. Purchase, June 1.................................................... 800.................. 13
d. Sale, May 1 (sold for $40 per unit).............................. 300
e. Sale, July 3 (sold for $40 per unit)............................... 600
f. Operating expenses (excluding income tax expense), $19,500
Required:
1. Calculate the number and cost of goods available for sale.
2. Calculate the number of units in ending inventory.
3. Compute the cost of ending inventory and cost of goods sold under (a) FIFO, (b) LIFO, and (c) weighted average cost.
4. Prepare an Income Statement that shows 2012 amounts for the FIFO method in one column, the LIFO method in another column, and the weighted average method in a final column. Include the following line items in the income statement: Sales, Cost of Goods Sold, Gross Profit, Operating Expenses, and Income from Operations.
5. Compare the Income from Operations and the ending inventory amounts that would be reported under the three methods. Explain the similarities and differences.
6. Which inventory costing method may be preferred by Orion Iron Corp. for income tax purposes? Explain.
Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...
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Related Book For
Fundamentals of Financial Accounting
ISBN: 978-0078025372
4th edition
Authors: Fred Phillips, Robert Libby, Patricia Libby
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