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Provide the highest net income

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Reference no: EM132532787

The ledger of ABC Company includes the following items:

a) Freight-in,

b) Purchase Returns and Allowances,

c) Purchases,

d) Sales Discounts,

e) Purchase Discounts.

Instructions

Question 1: Identify which items are included in goods available for sale.

Question 2: The management of ABC Company is considering the effects of various inventory-costing methods on its financial statements and its income tax expense. Assuming that the price the company pays for inventory is increasing, which method will:

a) provide the highest net income?

b) provide the highest ending inventory?

c) result in the lowest income tax expense?

d) result in the most stable earnings over a number of years?

3. ABC Company had 100 units in beginning inventory at a total cost of $10,000. The company purchased 200 units at a total cost of $26,000. At the end of the year, ABC had 80 units in ending inventory.

Instructions

Question 3: Compute the cost of the ending inventory and the cost of goods sold under

1. FIFO,

2. LIFO, and

3. Average-cost.

Reference no: EM132532787

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