QP Corp. sold 6,500 units of its product at $50 per unit in year 2010 and incurred operating expenses of $5 per unit in selling the units. It began the year with 700 units in inventory and made successive purchases of its product as follows.
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January 1
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Beginning inventory
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700 units @ $18 per unit
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February 20
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Purchase
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1,600 units @ $19 per unit
|
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May 16
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Purchase
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800 units @ $20 per unit
|
|
October 3
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Purchase
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500 units @ $21 per unit
|
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December 11
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Purchase
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3,500 units @ $22 per unit
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ASSIGNMENT:
1. Prepare comparative income statements for the three inventory costing methods of , LIFO, and weighted average. Include a detailed cost of goods sold section as part of each statement. The company uses a periodic inventory system , and its income tax rate is 30%. (Round per unit costs to three decimals, but inventory balances to the dollar.)
2. How would the financial results from using the three alternative inventory costing methods change if QP had been experiencing declining costs in its purchases of inventory?
3. What advantages and disadvantages are offered by using (a) LIFO and (b) FIFO? Assume the continuing of increasing costs.
These are my results but they do not add up!!
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FIFO
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LIFO
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Weighted Average
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|
Sales
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325,000
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325,000
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325,000
|
|
Inventory December 31, 2009
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12,600
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12,600
|
12,600
|
|
Cost of purchases
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133,900
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133,900
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133,900
|
|
Cost of goods available for sale
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146,500
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146,500
|
146,500
|
|
Inventory December 31, 2010
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79,100
|
59,000
|
52,800
|
|
Cost of goods sold
|
67,400
|
87,500
|
97,700
|
|
Gross profit
|
257,600
|
237,500
|
231,300
|
|
Expenses
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32,500
|
32,500
|
32,500
|
|
Income before Taxes
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225,100
|
205,000
|
198,800
|
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Income Tax Expense
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67,530
|
61,500
|
59,640
|
|
Net Income
|
111,440
|
109,760
|
110,866
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Supporting Calculations.