The Jarmen Cabinet Company sold 2,200 cabinets during 2010 at $80 per cabinet. Its beginning inventory on
Question:
The Jarmen Cabinet Company sold 2,200 cabinets during 2010 at $80 per cabinet. Its beginning inventory on January 1 was 130 cabinets at $28. Purchases made during the year were as follows:
February ..........225 cabinets @ $31.00
April ..........350 cabinets @ $32.50
June ...........700 cabinets @ $35.00
August ..........300 cabinets @ $33.00
October .........400 cabinets @ $34.00
November ........250 cabinets @ $36.00
The company’s selling and administrative expenses for the year were $50,500. The 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 assumption:
(a) The average-cost method,
(b) The FIFO method, and
(c) The LIFO method.
3. Compute inventory turnover and days inventory on hand under each of the inventory cost flow assumptions in requirement 2. What conclusion can you draw from this comparison?
Step by Step Answer:
1 Schedule of cost of goods available for sale prepared Total Units Price Cost Beginning inventory 130 2800 3640 Purchases February 225 3100 6975 Apri...View the full answer
