Question

Courtney Company uses a periodic inventory system. The following data were available: beginning inventory, 2,800 units at $35; purchases, 4,200 units at $40; operating expenses (excluding income taxes), $100,500; ending inventory per physical count at December 31, 1,650 units; sales price per unit, $70; and average income tax rate, 30%. Required: 1.Prepare income statements under the FIFO, LIFO, and weighted average costing methods. (Do not round intermediate calculations. Round your final answers to the nearest dollar amount.) income statment units FIFO LIFO weighted average sales revenue cost of goods sold gross profit operating expenses income from operations income tax expense net income

Answer 1

To prepare income statements under the FIFO, LIFO, and weighted average costing methods, you need to calculate the cost of goods sold (COGS) for each method. The COGS is calculated by adding the cost of beginning inventory and purchases, and then subtracting the cost of ending inventory.

Step-by-step explanation:

To prepare income statements under the FIFO, LIFO, and weighted average costing methods, we need to calculate the cost of goods sold (COGS) for each method.

The COGS is calculated by adding the cost of beginning inventory and purchases, and then subtracting the cost of ending inventory. Gross profit is calculated by subtracting COGS from sales revenue.

Operating expenses are deducted from gross profit to arrive at the income from operations. Income tax expense is calculated by multiplying the income from operations by the average income tax rate.

Net income is calculated by subtracting income tax expense from income from operations.

Using the given data:

FIFO: COGS = (Beginning Inventory + Purchases) - Ending Inventory = (2,800 units * $35) + (4,200 units * $40) - (1,650 units * $40). Sales Revenue = 7,000 units * $70.

Gross Profit = Sales Revenue - COGS. Income from Operations = Gross Profit - Operating Expenses. Income Tax Expense = Income from Operations * Average Income Tax Rate. Net Income = Income from Operations - Income Tax Expense.

LIFO: COGS = (Beginning Inventory + Purchases) - Ending Inventory = (2,800 units * $35) + (4,200 units * $40) - (1,650 units * $35). Sales Revenue = 7,000 units * $70.

Gross Profit = Sales Revenue - COGS. Income from Operations = Gross Profit - Operating Expenses. Income Tax Expense = Income from Operations * Average Income Tax Rate. Net Income = Income from Operations - Income Tax Expense.

Weighted Average: COGS = [(Beginning Inventory * $35) + (4,200 units * $40)] / (2,800 units + 4,200 units) * 7,000 units. Sales Revenue = 7,000 units * $70.

Gross Profit = Sales Revenue - COGS. Income from Operations = Gross Profit - Operating Expenses. Income Tax Expense = Income from Operations * Average Income Tax Rate. Net Income = Income from Operations - Income Tax Expense.

Rounded to the nearest dollar amount, the income statements under the FIFO, LIFO, and weighted average costing methods can be calculated based on the above steps.