Question

Study Appendix 16A. The Omaha Fertilizer Company had inventory on December 31, 20X0, of 20,000 bags at $10 = $200,000. Purchases during 20X1 were 30,000 bags. Sales were 28,000 bags for sales revenue of $17 per bag. Prepare a four-column comparative statement of gross margin for 20X1:
1. Assume that purchases were at $12 per unit. Assume FIFO and then LIFO (columns 1 and 2).
2. Assume that purchases were at $8 per unit. Assume FIFO and LIFO (columns 3 and 4).
3. Assume Omaha Fertilizer is reporting for tax purposes and has an income tax rate of 35%. Suppose all transactions are for cash.
a. Which inventory method in number 1 results in more cash for Omaha Fertilizer Company? By how much?
b. Which inventory method in number 2 results in more cash for Omaha Fertilizer Company? By how much?



$1.99
Sales1
Views54
Comments0
  • CreatedNovember 19, 2014
  • Files Included
Post your question
5000