Wilson Copy Center sells laser printers and supplies Assume

Wilson Copy Center sells laser printers and supplies. Assume wilson Copy Center started the year with 100 containers of ink (average cost of S9.10 each, FIFO cost of $8 60 each, LIFO cost of S8.00 each). During the year, Wilson Copy Center purchased 800 containers of ink at S10.00 and sold 600 units for $21.75 each. Wilson Copy Center paid operating expenses throughout the year, a total of S3,900. Ignore income taxes for this exercise. Prepare Wilson Copy Centers income statement for the current year ended December 31 under the average, FIFO, and LIFO inventory costing methods. Include a complete statement heading. Complete the income statement by selecting the appropriate heading and income statement labels, and then calculating the amounts for each of the three required inventory methods. (Cakculate unit costs to the nearest cent. Round all other calculations to the nearest whole dollar.)

Solution

Working note:

calculation of cost of goods sold under various methods:

average cost method:

total value of opening stock = 100 containers * $9.10

=>$910.

total value of purchases 800 * $10 =>$8000.

average cost of each unit = ($910 +$8000) / (100 + 800)

=>$9.9 per unit.

cost of goods sold = average cost per unit * number of units sold =>$9.9 * 600 units

=>$5,940.

now,

cost of goods sold under FIFO.

opening stock value = 100 units @ 8.60 =>$860.

since 600 units are sold, FIFO assumes that all the opening stock will be sold off first.

remaining (600 units sold - 100 units of opening stock) => 500 units will be of the current year purchases.

=>500 units * $10 =>$5,000

=> cost of goods sold under FIFO = $860 + $5000

=>$5,860.

now,

cost of goods sold under LIFO.

since 600 units are sold, LIFO assumes that all the current year purchases are sold off now, (i.e 100 units of opening inventory remains untouched, since the sale units (600 units) is less than purchase units (800).)

=> 600 units * $10.00 =>$6,000 is the cost of goods sold under LIFO.

Income statement is presented below:

Particulars	Average	FIFO	LIFO
Sales revenue ($21.75* 600 units)	$13,050	13,050	13,050
less: cost of goods sold (see note above)	(5,940)	(5,860)	(6,000)
Gross profit	7,110	7,190	7,050
less: operating expenses	(3,900)	(3,900)	(3,900)
Net income	3,210	3,290	3,150