E7-7 Analyzing and interpreting the Financial Statement Effects of FIFO, LIFO, and Weighted Average Cost [LO 7-3) Scoresby Inc. tracks the number of units purchased and sold throughout each year but applies its inventory costing method at the end of the year, as it uses a periodic Inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31 Units Cost 1,500 $24 Transactions a. Inventory. Beginning For the year: b. Purchase, March 5 c. Purchase, September 19 d. Sale, April 15 (sold for $69 per unit) e. Sale, October 31 (old for $72 per unit) 1. Operating expenses (excluding income tax expense). S406,000 25 27 7.500 3,500 2.400 6,500 Required: 1. Calculate the number and cost of goods available for sale. 2. Calculate the number of units in ending Inventory. 3. Compute the cost of ending Inventory and cost of goods sold under (a) FIFO, b) LIFO, and (c) weighted average cost. 4. Prepare an Income statement that shows the FIFO method, LIFO method and weighted average method. 6. Which Inventory costing method minimizes Income taxes? Complete this question by entering your answers in the tabs below. Required Required Required Required Required Prepare an income statement that shows the FIFO method, LIFO method and weighted average method. SCORESBY INC. Income Statement For the Year Ended December 31 FIFO UFO Weighted Average Income (Loss) from Operatong (Required 3 Required 6 >

Requirement 1 Cost of Goods Available for Sale Cost of Goods Available for sale 24.00 $ FIFO Cost per unit Units Beginning Inventory Purchases: 1500 $ 36,000 25.00 $ 27.00 $ 7500 $ 3500 $ 12500 Mar 5 1,87,500 Sep 19 Total 94,500 3,18,000 The number is 12500 units and cost of goods available for sale is $ 318,000 Requirement 2 Units Cost of Goods available for sale 12500 () Sale on Apr 15 -2400 () Sale on Oct 31 -6500 Ending Inventory 3600 The number of units in ending inventory is 3600 units. Requirement 3 Cost of Goods Available for Sale Cost of Goods sold FIFO Ending Inventory-FIFO Cost of goods Cost per Ending FIFO Cost of Goods Units sold Units Cost per unit Cost per unit units Available for sale unit 0 $ 24.00 $ sold Inventory 1500 $ Beginning Inventory Purchases: 24.00 $ 24.00 $ 1500 $ 36,000 36,000 25.00 $ 27.00 $ 7500 $ 3500 $ 12500 25.00 $ 100 25.00 $ 3500 $ 27.00 $ 7400 $ Mar 5 1,87,500 1,85,000 2,500 $ 94,500 Sep 19 27.00 94,500 Total 8900 $ 3,18,000 2,21,000 3600 97,000 Cost of Goods sold - LIFO Cost of Goods Available for Sale Ending Inventory-LIFO Cost per Ending Cost of goods LIFO Cost of Goods Cost per unit Units Cost per unit Units sold units Available for sale sold unit Inventory 24.00 $ Beginning Inventory Purchases: 24.00 $ 1500 $ 24.00 $ 1500 $ 36,000 36,000 2100 $ 25.00 $ 0 $ 27.00 $ 7500 $ 25.00 $ 27.00 $ 5400 S 3500 S 25.00 $ 27.00 $ Mar 5 52,500 1,87,500 1,35,000 Sep 19 Total 3500 $ 94,500 94,500 $ 88,500 12500 3,18,000 8900 2,29,500 3600 Cost of Goods sold Avg cost Cost of Goods Available for Sale Ending Inventory-Avg cost Cost per Ending Average Cost Cost of Goods Cost of goods Units sold Cost per unit Units Cost per unit units Available for sale sold unit Inventory Beginning Inventory Purchases: 1500 $ 24.00 $ 36,000 25.44 $ 3600 $25.44 $ 8900 $ 2,26,416 91,584 7500 S Mar 5 25.00 1,87,500 3500 $ 94,500 Sep 19 27.00 Total $ $ 3,18,000 2,26,416 12500 8900 3600 91,584 (318000/12500) Average cost p.u 25,44 Requirement 4 SCORESBY INC. Income Statement For the year ended December 31 Weighted FIFO Particulars LIFO Average $6,33,600 $ 6,33,600 $ $ -2,21,000 $ -2,29,500 $ $4,12,600 $ 4,04,100 $ $ 4,06,000 $ -4,06,000 $ -1,900 $ Sales [(2400*69)+(6500*72)] (-) Cost of Goods sold Gross Margin () Operating expenses Income (Loss) From Operations 6,33,600 -2,26,416 4,07,184 -4,06,000 6,600 $ 1,184 Requirement 6 The LIFO inventory costing method minimizes income taxes. Reason- Due to less income..