Solution-Compute cost of goods sold for each of the five

Compute cost of goods sold for each of the five years

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Reference no: EM131063393

Heller Bottling Company

Inventory flow assumptions over several periods and income taxes

Heller Bottling Company began business in 2008. Inventory units purchased and sold for the first year of operations and each of the following four years follow:

	Units Purchased	Cost per Units	Units Sold
2008	10,000	$12	5,000
2009	12,000	16	16,000
2010	5000	18	2,000
2011	10,000	21	10,000
2012	2000	23	6,000

Inadequate cash flows forced Heller Bottling Company to cease operations at the end of 2012.

a. Compute cost of goods sold for each of the five years if the company uses the following:

(1) LIFO cost flow assumption

(2) FIFO cost flow assumption

(3) Averaging cost flow assumption

b. Does the choice of a cost flow assumption affect total net income over the life of a business? Explain your answer.

c. If the choice of a cost flow assumption does not affect net income over the life of a business, how does the choice of LIFO give rise to a tax benefit?

Reference no: EM131063393

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Compute cost of goods sold for each of the five years

Reference no: EM131063393

Reference no: EM131063393

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