One of the most common mistakes new business owners make is C. setting unrealistic goals
As a new business owner, you have to determine your goal for your business which is achievable.
Answer:
c. Ending inventory will be lower if Blake uses weighted average than if FIFO were used
Explanation:
To check which answer is correct, we simply evaluate each option step by step.
<u>Option A</u>
Gross margin is the difference between selling price and cost.
Under FIFO gross margin is $14. (32 -18 =14)
Under LIFO gross margin is $13. (32-19 = 13)
Thus statement is incorrect as gross margin is higher if FIFO is used.
<u />
<u>Option B</u>
If FIFO is used, the dollar amount of ending inventory will be $19 as ending inventory will contain product purchased later that is at $19. In contrast, if LIFO is used, the dollar amount of ending inventory will be $18. Thus the statement becomes incorrect that it will be the same.
<u />
<u>Option C</u>
The ending inventory under FIFO is $19.
The ending inventory under LIFO is $18
The endng inventory under AVCO or weighted average will be, 18+19 / 2 = 18.5
Thus the statement is correct as the ending inventory under weighted average $18.5 is lower than ending inventory under FIFO $19. So, C is the correct Answer.
Answer:
b. $90,000 with a $10,000 loss carryover
Explanation:
Given that
Active business income = $90,000
From Activity A, the income earns = $20,000
From Activity B, the loss incurs = $30,000
So by considering the above information, the Adjusted gross income should be
The $90,000 should be recorded
Plus, the $10,000 loss should also be carryover
The $10,000 loss is come from
= $20,000 - $30,000
= -$10,000
