Beruflich Dokumente
Kultur Dokumente
Economic Consequences
Income Taxes and Liquidity
Bookkeeping Costs
LIFO Liquidation and Inventory Purchasing Practices
Debt and Compensation Practices
The Capital Market- Current ratio, Profit margin ratio
Balance Sheet:
Income Statement:
Balance Sheet
XX
XX
Sell:
Dr. Accounts Receivable XX
Sales price
Cr. Sales
XX
Dr. Cost of goods sold XX
Cost determined by FIFO,
Cr. Inventory
XX LIFO, or Average methods
XX
XX
XX
Sales price
XX
XX
XX
2011:
Purchase 1
Purchase 2
Total Purchases
Sales
10 units @ $13
15 units @ $15
20 units @ $35
$130
$225
$355
$700
Compare the COGS, Gross profit, and Ending inventory 2010 and 2011
results when using FIFO, Weighted Average, or LIFO periodic.
Revenue
Cost of Goods
Sold
Gross Margin
Balance Sheet
Inventory
Revenue
Cost of Goods
Sold
Gross Margin
Balance Sheet
Inventory
Weighted
Average
FIFO
LIFO
Inventory
Costing
Method
Weighted
Average
FIFO
LIFO
Revenue
Cost of Goods
Sold
Gross Margin
Balance Sheet
Inventory
Revenue
Cost of Goods
Sold
Gross Margin
Balance Sheet
Inventory
FIFO
LIFO
Inventory
Costing
Method
FIFO
LIFO
b.
Assume the original cost of the inventory was $52 million and that it
was written down to its market value of $40 million. If TII sells it for
$48 million cash in the following period, what journal entries would be
recorded? Assume that TII uses the perpetual inventory method.
ID7-4 continued
c. Applying the lower-of-cost-or-market rule in
this case would cause TII to recognize a loss in
the period of the write-down and income in
the subsequent period. Does such recognition
seem appropriate? Why or why not?
Number of
items
Total
2007
500
$12
$6,000
2009
200
$15
$3,000
Total
700
$9,000
During 2011, IBT sold 900 items for $75 each and purchased 350 items at $30
each. Expenses other than cost of goods sold totaled $20,000, and the federal
income tax rate is 30% of taxable income.
a. Prepare the 2011 income statement.
b. Assume that IBT purchased an additional 550 items on December 20, 2011
for $30 each. Prepare the 2011 income statement.
c. Compare the two income statements. Discuss the advantages to the
12.20.11 purchase. Discuss the disadvantages of such a strategy.