Chapter 5: 2DQ. (page 259)
Where is the amount of merchandise inventory disclosed in the financial statements?
Merchandise inventory is reflected in the balance sheet of the business entity.
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Use the data and results from Exercise 5-5 to prepare comparative income statements for the month of January for the company similar to those shown in Exhibit 5.8 for the four inventory methods. Assume expenses are $1,250, and that the applicable income tax rate is 40%. (Round amounts to cents.)
Required 1. Which method yields the highest net income?
Use the data and results from Exercise 5-5 to prepare comparative income statements for the month of January for the company similar to those shown in Exhibit 5.8 for the four inventory methods. Assume expenses are $1,250, and that the applicable income tax rate is 40%. (Round amounts to cents.)
2. Does net income using weighted average fall above, between, or below that using FIFO and LIFO?
Use the following information for Palmer Co. to compute inventory turnover for 2017 and 2016, and its days’ sales in inventory at December 31, 2017 and 2016. (Round answers to one decimal.) Comment on Palmer’s efficiency in using its assets to increase sales from 2016 to 2017.
2017 | 2016 | 2015 | |
Cost of goods sold | \(643,825 | \)426,650 | $391,300 |
Ending Inventory | 97,400 | 87,750 | 92,500 |
Why are incidental costs sometimes ignored in inventory costing? Under what accounting constraint is this permitted?
Identify the inventory costing method best described by each of the following separate statements. Assume a period of increasing costs.
_____3. Provides a tax advantage (deferral) to a corporation when costs are rising.
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