ACCTG 230 Chapter Notes - Chapter 06: Earnings Before Interest And Taxes, Finished Good

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greenimpala586

19 Oct 2016

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Chapter 06 inventory and cost of goods sold. Part a : understanding inventory and cost of goods sold. Inventory is made up of items held for sale, intended for sale and not yet nished items in normal business. The flow of inventory costs is : manufacturing companies make inventory (raw material > work in progress > Finished goods: merchandising companies buy inventory nished for resale (assemble, sort, repackage, store and install) Total inventory for sale is found by taking beginning inventory less purchases during the year. Multiple step income statements consist of gross pro t, operating income, income before. Gross pro t is found by taking net sales revenue less the cost of goods sold. Operating income is found by taking the cost of good sold adding utility expense and adding general expense. Income before taxes is found by taking non operating revenue plus expenses. Net income is found by taking income before taxes and adding taxes.

Related Questions


	Periodic Inventory Method

	Better Bottles, Inc. uses a PERIODIC inventory system and has the following information available:

	Description	# of Units	Cost per Unit	Total Cost
	Beginning inventory	20	$20.00	$400
	Jan 5 sold	15
	Jan 15 purchase	27	$22.00	594
	Jan 18 sold	21
	Jan 20 purchase	33	$30.00	990
	Total goods available for sale	80		$1,984

	Total goods sold	36


	Required:
1	Calculate both Cost of goods sold and Ending inventory using the Periodic FIFO Method.
2	Calculate both Cost of good sold and Ending Inventory using Periodic LIFO Method.
3	Use your calculations from 1-2 and complete the Income Statement.
	The company income tax rate:	0.25

1	FIFO Cost of Goods Sold - PERIODIC
	Units Sold Taken From:	# of Units	Cost per Unit	Total Cost


	Total Cost of Goods Sold FIFO


	FIFO Ending Inventory - PERIODIC
	Inventory Available	# of Units	Cost per Unit	Total Cost
	Beginning inventory
	+Purchase
	+Purchase
	(Less Cost of Goods Sold)
	Ending Inventory FIFO



2	LIFO Cost of Goods Sold - PERIODIC
	Units Sold Taken From:	# of Units	Cost per Unit	Total Cost


	Total Cost of Goods Sold LIFO


	LIFO Ending Inventory - PERIODIC
	Inventory Available	# of Units	Cost per Unit	Total Cost
	Beginning inventory
	+Purchase
	+Purchase
	(Less Cost of Goods Sold)
	Ending Inventory LIFO



3	Income Statement - Periodic Inventory Method
		FIFO	LIFO
	Sales revenue, net	25,000	25,000
	Cost of goods sold
	Gross profit
	Operating expenses	8,000	8,000
	Operating income before tax
	Income tax expense
	Net income

plumporpoise441

Vertical Analysis. Refer to the information of Cuneo Company above. 1- Prepare a common-size income statement for year 1, 2 and 3 by expressing each line item as a percentage of sale revenue. Cuneo Company Income Statements For years 1, 2, and 3 Year 1: Sales: $1,000,000 Less: Cost of goods sold: (700,000) Gross margin: $300,000 Less operating expenses: Selling expenses: (150,000) Administrative expenses: (50,000) Operating income: $100,000 Less: Interest expenses: (25,000) Income before taxes: $75,000 Year 2: Sales:$1,200,000 Less: Cost of goods sold: (700,000) Gross margin: $500,000 Less operating expenses: Selling expenses: (220,000) Administrative expenses:(60,000) Operating income:220,000 Less: Interest expenses: (25,000) Income before taxes: $195,000 Year 3: Sales: $1,700,000 Less: Cost of goods sold: (1,000,000) Gross margin: $700,000 Less operating expenses: Selling expenses: (250,000) Administrative expenses:(120,000) Operating income: $330,000 Less: Interest expenses: (25,000) Income before taxes: $305,000

carminedog139

Learning Objective 2: Compare inventory by three methods) Robinett Camping Surplus began April 2016 with 100 tents that cost $15 each. During the month, Robinett Camping Surplus made the following purchases at cost:

April 8 80 tents @ $20 = $1,600

19 140 tents @ $25 = 3,500

26 80 tents @ $30 = 2,400

Robinett Camping Surplus sold 307 tents, and at April 30, the ending inventory consists of 93 tents. The sale price of each tent was $50.

Requirements:

1. Determine the cost of goods sold and ending inventory amounts for April under the average cost, FIFO cost, and LIFO cost. Round average cost per unit to two decimal places, and round all other amounts to the nearest dollar.

2. Explain why cost of goods sold is highest under LIFO. Be specific.

3. Prepare the Camping Surplus income statement for April. Report gross profit. Operating expenses totaled $3,250. Robinett Camping Surplus uses average costing for inventory. The income tax rate is 30%.

*Solution:*

	Req. 1

	Inventory
	Beg. bal.		(100 units @ $15)		1,500
	Purchases:
	Apr.	8	(80 units @ $20)		1,600
		19	(140 units @ $25)		3,500	Cost of goods sold
		26	(80 units @ $30)		2,400	(307 units @ $?)		?
	End. bal.		(93 units @ $?)		?

			Cost of Goods Sold			Ending Inventory

	Average cost		307 Ã $???* = $				93 Ã $???* = $


	*Average cost per unit		=					= $
				($ + + + )
				( + + + )


	FIFO	(?? @ $) + (?? @ $)					(?? @ $) +
			+ (?? @ $)		= $		(?? @ $)	= $


	LIFO	(?? @ $) + (?? @ $) +
		(?? @ $) + (?? @ $)					?? @ $	= $
			= $



	Req. 2









	Req. 3

		Robinett Camping Surplus
		Income Statement
		Month Ended April 30, 2016
		Sales revenue (?? x $)
		Cost of goods sold
		Gross profit						-
		Operating expenses
		Income before income taxes						-
		Income tax expense (30%)
		Net income						-

magentachinchilla603

ACCTG 230 Chapter Notes - Chapter 06: Earnings Before Interest And Taxes, Finished Good

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