Information: QP Corp. sold 4,000 units of its product at $50 per unit in year 20
ID: 2420426 • Letter: I
Question
Information: QP Corp. sold 4,000 units of its product at $50 per unit in year 2013 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. Required Prepare comparative income statements similar to Exhibit 6.8 for the three inventory costing methods of FIFO, LIFO, and weighted average. (Round all amounts to dollars and cents.) 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 40%.Explanation / Answer
units Sold Price/Unit Operating Cost/Unit 4000 $ 50 $ 5 Date Particulars Units Price/Unit Total Cost Weighted Average Cost/Unit Jan-01 Beginning Inventory 700 $ 18 $ 12,600 Feb-20 purchase 1700 $ 19 $ 32,300 Mar-16 purchase 800 $ 20 $ 16,000 Oct-03 purchase 500 $ 21 $ 10,500 Dec-11 2300 $ 22 $ 50,600 122000/6000 6000 $ 122,000 $ 20.33 Units sold 4000 Inventory 2000 1 Fifo : In this method units first come is sold first i.e. inventory have latest units. i.e 2000 units @ 22 is in inventory(2000*22 = 44000), cost of goods sold is (122000-44000 = 78000) 2 LIFO : in this method units latest purchase is sold first i.e. inventory have old units i.e. 700 units @ 18 and 1300 units @ 19[(700*18)+(1300*19) = 37300], cost of goods sold is (122000-37300 = 84700) 3 Weighted average: in this method average of cost per unit is used for inventory and cost of goods sold i.e 2000units @ 20.33 = 40660, cost of goods sold 122000-40660 = 81340 Income Statement FIFO LIFO Weighted Average Sales 4000 $ 50 $ 200,000 $ 200,000 $ 200,000 Less: COGS $ 78,000 $ 84,700 $ 81,340 Gross profit $ 122,000 $ 115,300 $ 118,660 Less: Operating Cost 4000 $ 5 $ 20,000 $ 20,000 $ 20,000 Total Income $ 102,000 $ 95,300 $ 98,660 Less: Tax @ 40% $ 40,800 $ 38,120 $ 39,464 Net Income $ 61,200 $ 57,180 $ 59,196