Park Company reported the following March purchases and sales data for its only product. Date Activities Units Acquired at Cost Units Sold at Retail Mar. 1 Beginning inventory 270 units @ $9.40 = $ 2,538 Mar. 10 Sales 150 units @$17.40 Mar. 20 Purchase 340 units @ $8.40 = 2,856 Mar. 25 Sales 265 units @$17.40 Mar. 30 Purchase 210 units @ $7.40 = 1,554 Totals 820 units $ 6,948 415 units Park uses a perpetual inventory system. For specific identification, ending inventory consists of 405 units, where 210 are from the March 30 purchase, 80 are from the March 20 purchase, and 115 are from beginning inventory. 1. Complete comparative income statements for the month of March for Park Company for the four inventory methods. Assume expenses are $2,800, and that the applicable income tax rate is 30%.

Park Company reported the following March purchases and sales data for its only product.  

Date

Activities

Units Acquired at Cost

Units Sold at Retail

Mar.

1

Beginning inventory

270

units

@  $9.40

=

$

2,538

Mar.

10

Sales

150

units

@$17.40

Mar.

20

Purchase

340

units

@  $8.40

=

2,856

Mar.

25

Sales

265

units

@$17.40

Mar.

30

Purchase

210

units

@  $7.40

=

1,554

Totals

820

units

$

6,948

415

units

 

Park uses a perpetual inventory system. For specific identification, ending inventory consists of 405 units, where 210 are from the March 30 purchase, 80 are from the March 20 purchase, and 115 are from beginning inventory.

 

1.

Complete comparative income statements for the month of March for Park Company for the four inventory methods. Assume expenses are $2,800, and that the applicable income tax rate is 30%.   Exercise 5-4 Income effects of inventory methods LO A1 Park Company reported the following March purchases and sales data for its only product.   Date Activities Units Acquired at Cost Units Sold at Retail   Mar. 1   Beginning inventory   270  units  @  $9.40 = $ 2,538             Mar. 10   Sales                 150  units  @$17.40     Mar. 20   Purchase   340  units  @  $8.40 =   2,856             Mar. 25   Sales                 265  units  @$17.40     Mar. 30   Purchase   210  units  @  $7.40 =   1,554                                           Totals   820  units     $ 6,948   415  units                             Park uses a perpetual inventory system. For specific identification, ending inventory consists of 405 units, where 210 are from the March 30 purchase, 80 are from the March 20 purchase, and 115 are from beginning inventory.   1. Complete comparative income statements for the month of March for Park Company for the four inventory methods. Assume expenses are $2,800, and that the applicable income tax rate is 30%.           2. Which method yields the highest net income?       LIFO    3. Does net income using weighted average fall between that using FIFO and LIFO?       Yes    4. If costs were rising instead of falling, which method would yield the highest net income?       FIFO   Explanation: 1. Sales (415 units × $17.40 price) = $7,221   2. LIFO method results in the highest net income of $550.   3. Weighted average net income of $501 falls between the FIFO net income of $466 and the LIFO net income of $550.   4. If costs were rising instead of falling, then the FIFO method would yield the highest net income.