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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.
January 1
Beginning inventory
700 units @ $18 per unit
February 20
Purchase
1,600 units @ $19 per unit
May 16
800 units @ $20 per unit
October 3
500 units @ $21 per unit
December 11
3,500 units @ $22 per unit
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!!
FIFO
LIFO
Weighted Average
Sales
325,000
Inventory December 31, 2009
12,600
Cost of purchases
133,900
Cost of goods available for sale
146,500
Inventory December 31, 2010
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
32,500
Income before Taxes
225,100
205,000
198,800
Income Tax Expense
67,530
61,500
59,640
Net Income
111,440
109,760
110,866
Supporting Calculations.
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