Question

The following information pertains to the inventory of Parvin Company:

Jan. 1	Beginning inventory	300	units	@	$	19
Apr. 1	Purchased	2,900	units	@	$	24
Oct. 1	Purchased	1,000	units	@	$	25

During the year, Parvin sold 3,570 units of inventory at $43 per unit and incurred $17,500 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 30 percent income tax rate. Parvin started the period with cash of $211,800, inventory of $5,700, common stock of $194,000, and retained earnings of $23,500.

Required

1. Prepare income statements using FIFO and LIFO.
2. Determine the amount of income tax that Parvin would pay using each cost flow method.
3. Determine the cash flow from operating activities under FIFO and LIFO.

Answer 1

Working Notes:
	FIFO METHDO
			COST OF GOODS AVAILABLE FOR SALE	COST OF GOODS SOLD	CLOSING STOCK
	Date	Particulars	Units	Cost Per unit	Total	Units	Cost Per unit	Cost of Goods Sold	Units	Cost Per unit	Ending inventory
	Jan.01	Beginning Balance	300	$                   19.00	$                  5,700	300	$         19.00	$             5,700
	Apr.01	Purchases	2,900	$                   24.00	$               69,600	2,900	$         24.00	$           69,600
	Oct.01	Purchases	1,000	$                   25.00	$               25,000	370	$         25.00	$             9,250	630	$         25.00	$           15,750
		Total Goods Available For sale	4,200		$             100,300	3,570		$           84,550	630		$           15,750
	LIFO METHDO
			COST OF GOODS AVAILABLE FOR SALE	COST OF GOODS SOLD	CLOSING STOCK
	Date	Particulars	Units	Cost Per unit	Total	Units	Cost Per unit	Cost of Goods Sold	Units	Cost Per unit	Ending inventory
	Jan.01	Beginning Balance	300	$                   19.00	$                  5,700				300	$         19.00	$             5,700
	Apr.01	Purchases	2,900	$                   24.00	$               69,600	2,570	$         24.00	$           61,680	330	$         24.00	$             7,920
	Oct.01	Purchases	1,000	$                   25.00	$               25,000	1,000	$         25.00	$           25,000
		Total Goods Available For sale	4,200		$             100,300	3,570		$           86,680	630		$           13,620
	Solution: A & B
		Caclulation of Income statement and income tax Paid under FIFO & LIFO Method
			FIFO Method	LIFO Method
		Sales (3,570 Units X $ 43)	$              153,510	$              153,510
		Less: Cost of Goods Sold	$                84,550	$                86,680
		Gross Profit	$                68,960	$                66,830
		Operating Expenses	$                17,500	$                17,500
		Net income Before Tax	$                51,460	$                49,330
		Less: Income tax @ 30%	$                15,438	$                14,799
		Net income After Tax	$                36,022	$                34,531
	Solution: C
		Cash Flow From Operating Activities:
			FIFO Method	LIFO Method
		Net Income After Tax	$                36,022	$                34,531
		Change in Current Assets & Current Liabilities					ekkarill92 Next > < Previous Related Solutions The following information pertains to the inventory of Parvin Company for Year 3: Jan. 1 Beginning... The following information pertains to the inventory of Parvin Company for Year 3: Jan. 1 Beginning inventory 300 units @ $ 18 Apr. 1 Purchased 2,600 units @ $ 23 Oct. 1 Purchased 900 units @ $ 24 During Year 3, Parvin sold 3,230 units of inventory at $44 per unit and incurred $18,900 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 30 percent income... The following information pertains to the inventory of Parvin Company for Year 3: Jan. 1 Beginning... The following information pertains to the inventory of Parvin Company for Year 3: Jan. 1 Beginning inventory 400 units @ $ 19 Apr. 1 Purchased 2,500 units @ $ 24 Oct. 1 Purchased 1,100 units @ $ 25 During Year 3, Parvin sold 3,400 units of inventory at $41 per unit and incurred $18,000 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 30 percent income... The following information pertains to the inventory of Parvin Company during Year 2: Jan. 1 Beginning... The following information pertains to the inventory of Parvin Company during Year 2: Jan. 1 Beginning Inventory 650 units @ $ 40 Apr. 1 Purchased 2,500 units @ $ 45 Oct. 1 Purchased 850 units @ $ 48 During Year 2, Parvin sold 3,500 units of inventory at $80 per unit and incurred $44,000 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 30 percent income... 1. The following information pertains to Julia & Company: March 1 Beginning inventory = 30 units... 1. The following information pertains to Julia & Company: March 1 Beginning inventory = 30 units @ $5.40 March 3 Purchased 14 units @ 3.50 March 9 Sold 24 units @ 8.50 What is the ending inventory balance for Julia & Company assuming that it uses FIFO? a. $49 b. $81 c. $64 d. $108 2. Northwest Fur Co. started the year with $96,000 of merchandise inventory on hand. During the year, $415,000 in merchandise was purchased on account with... Coopers Company reported the following information: Units Unit Cost Units Sold Jan 1 Beginning inventory 190... Coopers Company reported the following information: Units Unit Cost Units Sold Jan 1 Beginning inventory 190 $50 Mar 8 Sale 100 Apr 10 Purchase 320 55 Jun 20 Sale 240 Oct 10 Purchase 570 60 Nov 30 Sale 450 Total Selling price per unit during the year: $75    790 Required Complete the following table. Cost Total Periodic Perpetual Date Purchased per Unit Cost Sold FIFO Weighted Average Units $ $ Units Units $ $ Units $ $ The following information pertains to Mayberry Corporation: Beginning inventory 6,000 units Ending inventory 1,000 units Direct... The following information pertains to Mayberry Corporation: Beginning inventory 6,000 units Ending inventory 1,000 units Direct labor per unit $40 Direct materials per unit 20 Variable overhead per unit 10 Fixed overhead per unit 30 Variable selling and admin. costs per unit 6 Fixed selling and admin. costs per unit 14 A) What is the value of the ending inventory using the absorption costing method? a) $600,000 b) $100,000 c) $120,000 d) $70,000 B) What is the value of the... The following information pertains to Chacon Inc. for last year: Beginning inventory in units 5,200 Units... The following information pertains to Chacon Inc. for last year: Beginning inventory in units 5,200 Units produced 20,600 Units sold 23,500 Costs per unit: Direct materials $8.50 Direct labor $3.60 Variable overhead $1.10 Fixed overhead* $4.35 Variable selling expenses $2.80 Fixed selling and administrative expenses $23,700 * Fixed overhead totals $89,610 per year. Assume that the selling price is $29 per unit. 1. Calculate operating income using absorption costing. Refer to the list of Labels and Amount Descriptions for the... The following information pertains to Chacon Inc. for last year: Beginning inventory in units 5,200 Units... The following information pertains to Chacon Inc. for last year: Beginning inventory in units 5,200 Units produced 20,600 Units sold 23,500 Costs per unit: Direct materials $8.50 Direct labor $3.60 Variable overhead $1.10 Fixed overhead* $4.35 Variable selling expenses $2.80 Fixed selling and administrative expenses $23,700 * Fixed overhead totals $89,610 per year. Assume that the selling price is $29 per unit. Labels Add Add fixed expenses Add variable expenses Less Less fixed expenses Less variable expenses Amount Descriptions Contribution... Beginning Inventory # of units Cost per unit Total Beginning Inventory 15 $10 $150 Jan 1.... Beginning Inventory # of units Cost per unit Total Beginning Inventory 15 $10 $150 Jan 1. Purchase 15 $11 $165 Jan 10. Purchase 15 $12 $180 Total 45 1. During January, AA sold 20 units at $30 per unit. Under FIFO, how much is the Gross Profit? $365 $380 $390 $395 2. During January, AA sold 20 units at $30 per unit Under the Weighted Average Method, how much is the Gross Profit?. $365 $380 $395 $400 3. During January,... The following information pertains to Company A's Year 1 inventory activities: Date Transaction Number of Units... The following information pertains to Company A's Year 1 inventory activities: Date Transaction Number of Units Purchase price per unit Sale price per unit January 1 Beginning balance 90 $40 April 11 Sale 50 $70 May 15 Purchase 160 $65 July 25 Sale 30 $75 For each of the following independent assumptions regarding Company A's inventory cost flow methods, click on the associated designated cell and enter the applicable dollar value of inventory that would be reported in Company A's... ADVERTISEMENT Subjects Accounting Advanced Math Anatomy and Physiology Biology Chemistry Civil Engineering Computer Science Economics Electrical Engineering Finance History Math Mechanical Engineering Operations Management Physics Psychology Statistics and Probability Nursing Other ADVERTISEMENT Latest Questions Rotating bits in C This rotates bits to the left which means the bits that were... Implement a method that meets the following requirements: (a) Takes as parameter 1) an int array... Write a function that takes a binary search tree as input and produces a linked list... XYZ Company is considering purchasing a piece of equipment costing $400,000. It has a useful life... Reflection of the short film "How Wolves Change Rivers" and Aldo Leopold's "Thinking Like A Mountain". What kind of rebar would be most cost effective for foundation? Would it be to design... Why would UnderArmour want to be sure that consumers can clearly see different models ( about... ADVERTISEMENT About @ 2020 WizEdu