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Reporting Ending Inventory on the Income Statement Cycle Tech Bicycles operates on a
Chapter 25, Problem 25-7(choose chapter or problem)
Reporting Ending Inventory on the Income Statement
Cycle Tech Bicycles operates on a fiscal year beginning January 1. At the beginning of the year, the shop had in stock six Model #8274, 10-speed bicycles, valued at $2,364 (6 bicycles @ $394 each). During the year the business made the following purchases:
There were seven bicycles in inventory at the end of the period. During the year the bicycles sold for $675 each.
Instructions
1. Calculate the cost of the ending inventory using the FIFO, LIFO, and weighted average cost methods.
2. Using the costs calculated in (1), determine the cost of merchandise sold for each inventory costing method.
3. Prepare a partial income statement for each inventory costing method showing sales and the calculation of gross profit on sales. Assume that the sales and purchases are net amounts.
Analyze Identify the method that resulted in the lowest cost of merchandise sold.
Questions & Answers
QUESTION:
Reporting Ending Inventory on the Income Statement
Cycle Tech Bicycles operates on a fiscal year beginning January 1. At the beginning of the year, the shop had in stock six Model #8274, 10-speed bicycles, valued at $2,364 (6 bicycles @ $394 each). During the year the business made the following purchases:
There were seven bicycles in inventory at the end of the period. During the year the bicycles sold for $675 each.
Instructions
1. Calculate the cost of the ending inventory using the FIFO, LIFO, and weighted average cost methods.
2. Using the costs calculated in (1), determine the cost of merchandise sold for each inventory costing method.
3. Prepare a partial income statement for each inventory costing method showing sales and the calculation of gross profit on sales. Assume that the sales and purchases are net amounts.
Analyze Identify the method that resulted in the lowest cost of merchandise sold.
ANSWER:Step 1 of 5
FIFO refers to the method used in assigning the cost to the inventory of the business entity and the cost of goods sold. Under this method, the cost of the earliest acquired inventory is assigned to the cost of goods sold, and the latest inventory is assigned to ending inventory.