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In: Accounting

Income is to be evaluated under four different situations as follows: a. Prices are rising: (1)...

Income is to be evaluated under four different situations as follows:


a. Prices are rising:

(1) Situation A: FIFO is used.

(2) Situation B: LIFO is used.

b. Prices are falling:

(1) Situation C: FIFO is used.

(2) Situation D: LIFO is used.


The basic data common to all four situations are: sales, 502 units for $16,064; beginning inventory, 287 units; purchases, 388 units; ending inventory, 173 units; and operating expenses, $3,100. The income tax rate is 30%.

Required:

1. Complete the following tabulation for each situation in Situations A and B (prices rising), assume the following: beginning inventory, 287 units at $11 = $3,157; purchases, 388 units at $12 = $4,656. In Situations C and D (prices falling), assume the opposite; that is, beginning inventory, 287 units at $12 = $3,444; purchases, 388 units at $11 = $4,268.Use periodic inventory procedures.(Round your answers to nearest dollar amount

prices rising

SITUATION A

SITUATION B

prices falling

situation A

SITUATION B
SALES REVENUE $16064 16064 16064 16064
BEGINING INVENTORY 3157
PURCHASES 4656
GOODS AVAILABLE FOR SALE 7813
ENDING INVENTORY
2076
COST OF GOODS SOLD 5737
GROSS PROFIT 10327
EXPENSES 3100 3100 3100 3100
PRETAX INCOME 7227
INCOME TAX EXPENSE 2168
NET INCOME $5,059

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