Homework SourseThe BooksteinCompany began business on 112016 when they sold
| The BooksteinCompany began business on 1/1/2016 when they sold 5000 shares of stock for $46,000 | ||||||||
| During 2016 Bookstein: | ||||||||
| a) on 1/13/2016 Bookstein purchased 100 books for $14 each | ||||||||
| b) on 7/1/2016 Bookstein purchased 400 books for $15 each | ||||||||
| c) On 10/1/2016 Bookstein purchased 300 books for $16 each | ||||||||
| On December 31, 2016 a count of the warehouse showed 270 books | ||||||||
| On average Bookstein sold books for $23 each | ||||||||
| At the end of the year Booksteinhad no receivables or payables. | ||||||||
| Booksteinis in the 40% tax rate | ||||||||
| PART 1: FOR 2016 DETERMINE | ||||||||
| A) COST OF GOODS SOLD FOR BooksteinIF SHE USES FIFO | ||||||||
| B) ENDING INVENTORY FOR BooksteinIF SHE USES FIFO | ||||||||
| C) NET INCOME IF Bookstein USES FIFO (DON\'T FORGET ABOUT TAXES) | ||||||||
| D) ENDING CASH IF Bookstein USES FIFO | ||||||||
| E) COST OF GOODS SOLD FOR BooksteinIF SHE USES LIFO | ||||||||
| F) ENDING INVENTORY FOR BooksteinIF SHE USES LIFO | ||||||||
| G) NET INCOME IF BooksteinUSES LIFO (DON\'T FORGET ABOUT TAXES) | ||||||||
| H) ENDING CASH IF MARY POPPINTS USES LIFO | ||||||||
| I) HOW MUCH DID BooksteinSAVE BY USING LIFO INSTEAD OF FIFO FOR HER UMBRELLAS | ||||||||
| The BooksteinCompany began business on 1/1/2016 when they sold 5000 shares of stock for $46,000 | ||||||||
| During 2016 Bookstein: | ||||||||
| a) on 1/13/2016 Bookstein purchased 100 books for $14 each | ||||||||
| b) on 7/1/2016 Bookstein purchased 400 books for $15 each | ||||||||
| c) On 10/1/2016 Bookstein purchased 300 books for $16 each | ||||||||
| On December 31, 2016 a count of the warehouse showed 270 books | ||||||||
| On average Bookstein sold books for $23 each | ||||||||
| At the end of the year Booksteinhad no receivables or payables. | ||||||||
| Booksteinis in the 40% tax rate | ||||||||
| PART 1: FOR 2016 DETERMINE | ||||||||
| A) COST OF GOODS SOLD FOR BooksteinIF SHE USES FIFO | ||||||||
| B) ENDING INVENTORY FOR BooksteinIF SHE USES FIFO | ||||||||
| C) NET INCOME IF Bookstein USES FIFO (DON\'T FORGET ABOUT TAXES) | ||||||||
| D) ENDING CASH IF Bookstein USES FIFO | ||||||||
| E) COST OF GOODS SOLD FOR BooksteinIF SHE USES LIFO | ||||||||
| F) ENDING INVENTORY FOR BooksteinIF SHE USES LIFO | ||||||||
| G) NET INCOME IF BooksteinUSES LIFO (DON\'T FORGET ABOUT TAXES) | ||||||||
| H) ENDING CASH IF MARY POPPINTS USES LIFO | ||||||||
| I) HOW MUCH DID BooksteinSAVE BY USING LIFO INSTEAD OF FIFO FOR HER UMBRELLAS | ||||||||
Solution
In FIFO method stock purchased first sold first hence ending inventor always include stock from last purchases.
a). Cost of Goods Sold in FIFO:-
= (100 * $14) + (400 * $15) + [(300-270)* $16]
= $7880
b). Ending Inventory in FIFO:-
= 270 * $16 = $4320
c). Net Income = Sales - COGS
= (530 units * $23) - $7880
= $12190 - $7880 = $4310
Less Tax 40% = $4310 * 40% = $1724
Net Income after tax = $2586
d). Ending Cash = Opening balance + Sales - Purchases
= $46000 + $12190 - ($7880 + $4320)
= $46000 + $12190 - $12200 = $45990
In LIFO Inventory purchased in last sold first.
e). Cost of Goods Sold = [(400-170) * $15] + (300* $16)
= (230 * 15) + (300*16) = $8250
f). Ending inventory in LIFO = (100 * $14) + (170 * $15)
= $3950
g). Net Income in LIFO = Sales - COGS
= $12190 - $8250 = $3940
Less TAx 40% = $3940 * 40% = $1576
Net Income after tax = $2364
h). Ending Cash In LIFO = It will remain same as in FIFO = $45990
i). Saving is due to less net income in LIFO in comparison of FIFO due to which lower tax has been paid.
