Project #82209 - Inventory Analysis

At the end of January 2014, the records of Donner Company showed the following for a particular item that sold at $16 per unit:    
                 
  Transactions     Units Amount          
    Inventory, January 1, 2014                            500  $                    2,365          
    Purchase, January 12                            600                        3,600          
    Purchase, January 26                            160                        1,280          
    Sale                         (370)            
    Sale                         (250)            
                 
Required:              
1a. Compute Cost of Goods Sold under each method of inventory: average cost, FIFO, LIFO, and specific identification. For specific   
  identification, assume that the first sale was selected from the beginning inventory and the second sale was selected from the  
   January 12 purchase. (Round unit price to 2 decimal places. Input all amounts as positive values.)      
  Input areas are shaded.              
                 
  Average Cost Cost of Good Available for Sale Cost of Goods Sold  
    # of Units Cost per Unit Cost of Goods Available for Sale # of Units Sold Cost per Unit Cost of Goods Sold  
  Beginning inventory              
  Purchases:              
  January 12, 2014              
  January 26, 2014              
  Total                      
                 
  FIFO Cost of Goods Available for Sale Cost of Goods Sold  
    # of Units Cost per Unit Cost of Goods Available for Sale # of Units Sold Cost per Unit Cost of Goods Sold  
  Beginning inventory                            500   $0         
  Purchases:              
  January 12, 2014                            600   $0         
  January 26, 2014                            160   $0        
  Total                        1,260   $0 0        
                 
  LIFO Cost of Goods Available for Sale Cost of Goods Sold  
    # of Units Cost per Unit Cost of Goods Available for Sale # of Units Sold Cost per Unit Cost of Goods Sold  
  Beginning inventory                            500                   
  Purchases:              
  January 12, 2014                            600                   
  January 26, 2014                            160                   
  Total                        1,260    $                           -   0    $                    4,040  
                 
  Specific Identification Cost of Goods Available for Sale Cost of Goods Sold  
    # of Units Cost per Unit Cost of Goods Available for Sale # of Units Sold Cost per Unit Cost of Goods Sold  
  Beginning inventory                            500                   
  Purchases:              
  January 12, 2014                            600                   
  January 26, 2014                            160                   
  Total                        1,260    $                           -   0        
                 
Required:              
2a. FIFO and LIFO, which method would result in the higher pretax income?        
                 
                 
                 
2b. FIFO and LIFO, which would result in the higher EPS?          
                 
                 
                 
3 FIFO and LIFO, which method would result in the lower income tax expense? Assume a 30 percent average tax rate.    
                 
                 
                 
4 FIFO and LIFO, which method would produce the more favorable cash flow?        
                 
                 
                     
At the beginning of the year, Plummer’s Sports Center bought three used fitness machines from Advantage, Inc. The machines immediately  
were overhauled, installed, and started operating. The machines were different; therefore, each had to be recorded separately in the accounts.  
                     
    Machine A Machine B Machine C            
    Amount paid for asset  $          11,000  $          30,000  $             8,000            
    Installation costs                     500                 1,000                     500            
    Renovation costs prior to use                 2,500                 1,000                 1,500            
                     
  By the end of the first year, each machine had been operating 4,800 hours.            
                     
Required:                    
1 Compute the cost of each machine.                
                     
    Total Cost                
  Machine A                  
  Machine B                  
  Machine C                  
                     
Required:                    
2 Prepare one entry to record depreciation expense at the end of year 1, assuming the following:        
   (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)      
                     
    Estimates              
  Machine Life Residual Value Depreciation Method          
  A 5 years   $1,000   Straight-line          
  B 60,000 hours   2,000  Units-of-production            
  C 4 years   1,500   Double-declining-balance          
                     
Transaction General Journal Debit Credit              
1 Depreciation expense 10,000                
 Net income results, reported in the financial statement presentation, can be affected by the inventory reporting methods used. FIFO, LIFO, and weighted average methods each have their own implications during periods of inflation and deflation. Assume the role of a manager, employee, or an investor, and in 1–2 pages analyze the GAAP and ethical implications of each reporting method in a hypothetical company. Then, given your role, select which reporting method you would use, and explain why. Consider tax liabilities and profit levels in your response, as well as ethical considerations you may have for your valuation method selection.

Submission Requirements

  • Written communication: It should be free of errors that detract from the overall message.
  • APA formatting: Resources and citations are formatted according to APA (6th edition) style and formatting.
  • Length of paper: 1–2 pages, not including cover page and references.
  • Font and font size: Times New Roman, 12-point.
                   
                     
                     
                     
                     
                     
                     
               

Subject Business
Due By (Pacific Time) 09/19/2015 09:00 am
Report DMCA
TutorRating
pallavi

Chat Now!

out of 1971 reviews
More..
amosmm

Chat Now!

out of 766 reviews
More..
PhyzKyd

Chat Now!

out of 1164 reviews
More..
rajdeep77

Chat Now!

out of 721 reviews
More..
sctys

Chat Now!

out of 1600 reviews
More..
sharadgreen

Chat Now!

out of 770 reviews
More..
topnotcher

Chat Now!

out of 766 reviews
More..
XXXIAO

Chat Now!

out of 680 reviews
More..
All Rights Reserved. Copyright by AceMyHW.com - Copyright Policy