loader  Loading... Please wait...

Question(s) / Instruction(s):

 Analyzing and Interpreting the Financial Statement Effects of Periodic FIFO, LIFO, and Weighted Average Cost

Orion Iron Corp. tracks the number of units purchased and sold throughout each year but applies its inventory costing method at the end of the year, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31, 2009.


                                                Transactions                                       Units                                     Unit Cost

  1. Inventory, December 31, 2008                     3,000                                     $12     

  For the year 2009:                            

                 b.           Purchase, April 11                                            9,000                                     10     

                 c.            Purchase, June 1                                              8,000                                     13     

                 d.           Sale, May 1 (sold for $40 per unit)            3,000    

                 e.           Sale, July 3 (sold for $40 per unit)              6,000    

                 f.            Operating expenses (excluding income tax expense), $195,000                 

Requirement 1:

Calculate the number and cost of goods available for sale.

Requirement 2:

Calculate the number of units in ending inventory.

 Requirement 3:

Compute the cost of ending inventory and cost of goods sold under (a) FIFO, (b) LIFO, and (c) weighted average cost.

Requirement 4:

Prepare an income statement that shows 2009 amounts under the FIFO method, LIFO method and weighted average method

Requirement 5:

Which inventory costing method may be preferred by Orion Iron Corp. for income tax purposes?

Find Similar Answers by Subject

Student Reviews

Rate and review your solution! (Please rate on a Scale of 1 - 5. Top Rating is 5.)

Expert's Answer
Download Solution:

This solution includes:

  • Plain text
  • Cited sources when necessary
  • Attached file(s)
  • Solution Document(s)

Reach Us