Reference no: EM132485478

Point 1. Carson and Leggatt form a partnership on June 1 to operate a clothing store. Carson contributes $50,000 in cash and Leggatt contributes $65,000 in inventory. During the month on June the following transactions took place.

1. Additional inventory was purchase at a cost of 25,000

2. Cash sales for the month were 32,000. The inventory that was sold had a cost of 16,275

3. Carson was paid 6,000 in cash, and Leggat was paid 4,000

4. The partnership borrowed $65,000 from Fifth Third Bank.

5. A store and land were purchased land and a building for 26,000 and 55,000 respectively.

Question a) Make a Balance sheet as of June 1

Question b) Make a Balance sheet as of June 30.

Point 2. On May 31, Bridgewater Watch Retailers had no watches on hand. During the next three months it purchased 50 watches for $750 each, then 80 for $820. During this time 90 watches were sold.

Question a) What is the inventory amount under FIFO?

Question b) What is the inventory amount under LIFO?

Question c) Why would a US company choose LIFO for inventory accounting? What are the implications of LIFO on the Income Statement?