Effects of Inventory Costing Methods Jefferson Enterprises has the following income statement data available for the year: Sales revenue $737,200 Operating expenses 243,700 Interest expense 39,500 Income tax rate 34% Jefferson uses a perpetual inventory accounting system and the average cost method. Jefferson is considering adopting the FIFO or LIFO method for costing inventory. Jefferson's accountant prepared the following data: If Average Cost Used If FIFO Used If LIFO Used Ending inventory $65,950 $78,500 $40,100 Cost of goods sold 399,050 386,500 424,900 Required:
Effects of Inventory Costing Methods Jefferson Enterprises has the following income statement data available for the year: Sales revenue $737,200 Operating expenses 243,700 Interest expense 39,500 Income tax rate 34% Jefferson uses a perpetual inventory accounting system and the average cost method. Jefferson is considering adopting the FIFO or LIFO method for costing inventory. Jefferson's accountant prepared the following data: If Average Cost Used If FIFO Used If LIFO Used Ending inventory $65,950 $78,500 $40,100 Cost of goods sold 399,050 386,500 424,900 Required:
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter6: Cost Of Goods Sold And Inventory
Section: Chapter Questions
Problem 53E: Effects of Inventory Costing Methods Jefferson Enterprises has the following income statement data...
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Effects of Inventory Costing Methods
Jefferson Enterprises has the following income statement data available for the year:
Sales revenue | $737,200 |
Operating expenses | 243,700 |
Interest expense | 39,500 |
Income tax rate | 34% |
Jefferson uses a perpetual inventory accounting system and the average cost method. Jefferson is considering adopting the FIFO or LIFO method for costing inventory. Jefferson's accountant prepared the following data:
If Average Cost Used | If FIFO Used | If LIFO Used | ||||
Ending inventory | $65,950 | $78,500 | $40,100 | |||
Cost of goods sold | 399,050 | 386,500 | 424,900 |
Required:
1. Compute income before taxes, income taxes expense, and net income for each of the three inventory costing methods. (Round to the nearest dollar.)
Average Cost | FIFO | LIFO | |
Income before taxes | $fill in the blank 1 | $fill in the blank 2 | $fill in the blank 3 |
Income tax expense | $fill in the blank 4 | $fill in the blank 5 | $fill in the blank 6 |
Net income | $fill in the blank 7 | $fill in the blank 8 | $fill in the blank 9 |
2. Conceptual Connection: Which method produces the most realistic amount for net income? For inventory?
For net income |
|
For inventory |
|
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