The following information pertains to the inventory of Parvin Company during Year 2: Jan. 1 Beginning Inventory 400 units @ $ 30 Apr. 1 Purchased 2,000 units @ $ 35 Oct. 1 Purchased 600 units @ $ 38 During Year 2, Parvin sold 2,700 units of inventory at $90 per unit and incurred $41,500 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 30 percent income tax rate. Parvin started the period with cash of $75,000, inventory of $12,000, common stock of $50,000, and retained earnings of $37,000. Required a. Record the above transactions in general journal form and post to T-accounts using (1) FIFO and (2) LIFO. Use a separate set of journal entries and T-accounts for each method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Question

Ryan Fischer

Business

25 April, 01:41

The following information pertains to the inventory of Parvin Company during Year 2: Jan. 1 Beginning Inventory 400 units @ $ 30 Apr. 1 Purchased 2,000 units @ $ 35 Oct. 1 Purchased 600 units @ $ 38 During Year 2, Parvin sold 2,700 units of inventory at $90 per unit and incurred $41,500 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 30 percent income tax rate. Parvin started the period with cash of $75,000, inventory of $12,000, common stock of $50,000, and retained earnings of $37,000. Required a. Record the above transactions in general journal form and post to T-accounts using (1) FIFO and (2) LIFO. Use a separate set of journal entries and T-accounts for each method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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Jazmine Mcpherson · Answer 1

Required a. Record the above transactions in general journal form and post to T-accounts using (1) FIFO and (2) LIFO. Use a separate set of journal entries and T-accounts for each method.

Explanation:

Units Cost Price Cost Price

Begining Inventory 400 30 12.000

purchase 1 2.000 35 70.000

purchase 2 600 38

Sales 1.700 90 153.000

FIFO Units Cost Sale Price Cost Price Cost of goods

Begining Inventory 400 30 400 12.000 12000

purchase 1 2.000 35 1300 70.000 45500

purchase 2 600 38 0 22.800 0

Sales 1.700 90 153.000 57500

0

LIFO Units Cost Sale Price Cost Price Cost of goods

Begining Inventory 400 30 0 12.000 0

purchase 1 2.000 35 1.100 70.000 38500

purchase 2 600 38 600 22.800 22800

Sales 1.700 90 153.000 61300

0

Fifo Lifo

Revenue 153.000 153.000

Cost of goods 57500 61300

Gross margin 95.500 91.700

Expenses 41500 41500

Ebit 54.000 50.200

Tax rate 30% 30%

Tax expense 16200 15060

Net Income 37.800 35.140

FiFO

1

Db Cash 153.000

Cr Revenue 153.000

2

Db Cost of goods 57500

Cr Inventory 57500

3

Db Expenses 41500

Cr Cash 41500

4

Db tax expense 16200

Cr cash 16200

LIFO

1

Db Cash 153.000

Cr Revenue 153.000

2

Db Cost of goods 61300

Cr Inventory 61300

3

Db Expenses 41500

Cr Cash 41500

4

Db tax expense 15060

Cr cash 15060