Question

Futuristic Electronic Center began July with 100 units of merchandise inventory that cost $ 78 each. During July​, the store made the following​ purchasesJul 3 40 [email protected] $ 80 each 12 60 units S 82 each 18 40 units S 94 eaclhFuturistic uses the periodic inventory​ system, and the physical count at July 31 indicates that 130 units of merchandise inventory are on hand.
1. Determine the ending merchandise inventory and cost of goods sold amounts for the July financial statements using the​ FIFO, LIFO, and​ weighted-average inventory costing methods.
2. Sales revenue for July totaled $28,000. Compute Futuristic's gross profit for July using each method.
3. Which method will result in the lowest income taxes for Futuristic​? ​Why? Which method will result in the highest net income for Futuristic​? ​Why?

Answer 1

Answer:

FIFO

total ending inventory 11,080

COGS                          10,200

LIFO

ENDING     10,200

COGS          9,480

For taxes reasons it would be better to use FIFO as the COGS is higher then, less income taxes

The higher net income will be with the method of lower COGS which is LIFO

Explanation:

beginning 100 at 78

40 at 80

60 at 82

40 at 94

FIFO

the ending inventory will be the last units: as the first are being sold

40 at 94

60 at 82

30 at 80

total ending inventory 11,080

COGS

100 at 78 and 10 at 80 = 10,200

LIFO

here the ending inveotry are the first unit while the COGS the last:

ending

100 at 78

 30 at 80

ENDING 10,200

COGS

40 at 94

60 at 82

10 at 80

total  9,480