Terpsichore Company uses a perpetual inventory system. For 2018 and 2019, Terpsichore has the following data: Required:
Question:
Terpsichore Company uses a perpetual inventory system. For 2018 and 2019, Terpsichore has the following data:
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Required:
1. For each year, compute cost of goods sold, the cost of ending inventory, and gross margin using FIFO.
2. For each year, compute cost of goods sold, the cost of ending inventory, and gross margin using LIFO.
3. For each year, compute cost of goods sold, the cost of ending inventory, and gross margin using the average cost method.
4. Which method would result in the lowest amount paid for taxes?
5. Which method produces the most realistic amount for income? For inventory? Explain your answer.
6. Compute Terpsichore's gross profit ratio and inventory turnover ratio under each of the three inventory costing methods. How would the choice of inventory costing method affect these ratios?
Inventory Turnover RatioThe inventory turnover ratio is a ratio of cost of goods sold to its average inventory. It is measured in times with respect to the cost of goods sold in a year normally. Inventory Turnover Ratio FormulaWhere,... 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 =...
Step by Step Answer:
1 Under the FIFO method cost of goods sold is 63300 and 35000 for 2018 and 2019 respectively Ending inventory is 28800 and 49600 for 2018 and 2019 respectively Calculations are shown below Gross Margi...View the full answer
