Question & Answer: E7-7 Analyzing and Interpreting the Financial Statement Effects of FIFO, LIFO, and Weighted Average Cost [LO…..

E7-7 Analyzing and Interpreting the Financial Statement Effects of FIFO, LIFO, and Weighted Average Cost [LO 7-3]

Scoresby Inc. tracks the number of units purchased and sold throughout each year but applies its inventory costing method at the end of the year, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.

 

Don't use plagiarized sources. Get Your Custom Essay on
Question & Answer: E7-7 Analyzing and Interpreting the Financial Statement Effects of FIFO, LIFO, and Weighted Average Cost [LO…..
GET AN ESSAY WRITTEN FOR YOU FROM AS LOW AS $13/PAGE
Order Essay
Transactions Units Unit Cost
  a. Inventory, Beginning 3,000 $ 8
  For the year:
  b. Purchase, March 5 9,500 9
  c. Purchase, September 19 5,000 11
  d. Sale, April 15 (sold for $29 per unit) 4,000
  e. Sale, October 31 (sold for $31 per unit) 8,000
  f. Operating expenses (excluding income tax expense), $250,000

Expert Answer

 

Income statement Using FIFO method
sales 4000*29 364000
8000*31
less cost of goods sold
(3000*8)+(1000*9) 105000
8000*9
gross profit 259000
less operating profit 250000
operating profit 9000
Income statement Using LIFO method FIFO LIFO WEIGHTED AVERAGE METHOD
sales 4000*29 364000 SALES 364000 364000 364000
8000*31 COST OF GOODS SOLD 105000 126000 112800
less cost of goods sold GROSS PROFIT 259000 238000 251200
(4000*11) 126000 LESS OPERATING EXPENSES 250000 250000 250000
(3000*9)+(5000*11) OPERATING PROFIT 9000 -12000 1200
gross profit 238000
less operating profit 250000
operating profit -12000
Weighted average method
3000*8 24000
9500*9 85500
5000*11 55000
weighted average cost 9.4
Income statement Using weighted average method
sales 4000*29 364000
8000*31
less cost of goods sold
12000*9.4 112800
gross profit 251200
less operating profit 250000
operating profit 1200

Still stressed from student homework?
Get quality assistance from academic writers!