Suppose a Williams store in Cleveland, Ohio, ended September 2010 with 1,100,000 units of merchandise that cost

Question:

Suppose a Williams store in Cleveland, Ohio, ended September 2010 with 1,100,000 units of merchandise that cost an average of $9.00 each. Suppose the store then sold 1,000,000 units for $9.7 million during October. Further, assume the store made two large purchases during October as follows:

Requirements
1. At October 31, the store manager needs to know the stores gross profit under both FIFO and LIFO. Supply this information.
2. What caused the FIFO and LIFO gross profit figures to differ?
3. Assume that the store uses FIFO, and that the store manager, whose bonus is based on profits, decides to value all units in ending inventory at $9 per unit. What impact will this action have on gross profit and net income? Does GAAP allowthis?

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 =... GAAP
Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the...