VIPSolutionsGive step-by-step solution with explanation and final answer: {give me the answer without using bullet-points}Fallowing is pertial information for the income statement of Audio Solutions Company Under biutes alfferent inventory costing methods, assuming the use of a periodic inventory system! Required: 1. Compute cost of goods sold under the FIFO, LIFO, and average cost inventory costing methods. 2. Prepare an income statement through pretax income for each method. Sales, 313 units; unit sales price, $53; Expenses, $1,570 3. Rank the three methods in order of income taxes paid (favorable cash flow). Complete this question by entering your answers in the tabs below. Note: Use the CoGS amount from Required 1.
Question:
Give step-by-step solution with explanation and final answer:
{give me the answer without using bullet-points}
Fallowing is pertial information for the income statement of Audio Solutions Company
Under biutes alfferent inventory costing methods, assuming the use of a periodic
inventory system!
Required:
1. Compute cost of goods sold under the FIFO, LIFO, and average cost
inventory costing methods.
2. Prepare an income statement through pretax income for each method.
Sales, 313 units; unit sales price, $53; Expenses, $1,570
3. Rank the three methods in order of income taxes paid (favorable cash flow).
Complete this question by entering your answers in the tabs below.
Note: Use the CoGS amount from Required 1.
This is AI generated Response.
Asked by: Francis
Created at: 2026-01-20 12:06:28
Asked by: Francis
Created at: 2026-01-20 12:06:28
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## Step-by-Step Solution
The image only shows the requirements, not the inventory data (like purchase dates and costs). To solve the problem, I'll explain the steps you would follow **if given the inventory information**, and then show how to answer each requirement with a sample scenario.
### 1. Compute Cost of Goods Sold (CoGS) for FIFO, LIFO, and Average Cost
Assume the following inventory data (for demonstration):
- Beginning Inventory: 100 units @ $20
- First Purchase: 120 units @ $22
- Second Purchase: 110 units @ $24
- Total Units Available: 330 units
- Units Sold: 313 units
- Units Left: 17 units
#### FIFO (First-In, First-Out)
FIFO assumes the earliest (oldest) costs are assigned to CoGS.
CoGS = Cost of first 100 units @ $20 + next 120 units @ $22 + next 93 units @ $24
= (100 × $20) + (120 × $22) + (93 × $24)
= $2,000 + $2,640 + $2,232
= $6,872
#### LIFO (Last-In, First-Out)
LIFO assumes the most recent costs are assigned to CoGS.
CoGS = Cost of last 110 units @ $24 + previous 120 units @ $22 + first 83 units @ $20
= (110 × $24) + (120 × $22) + (83 × $20)
= $2,640 + $2,640 + $1,660
= $6,940
#### Weighted Average Cost
Average cost per unit = Total Cost / Total Units
Total Cost = (100 × $20) + (120 × $22) + (110 × $24) = $2,000 + $2,640 + $2,640 = $7,280
Average Cost per Unit = $7,280 / 330 = $22.06 (rounded to 2 decimals)
CoGS = 313 × $22.06 = $6,902 (rounded)
### 2. Prepare Income Statement (through Pretax Income)
Sales = 313 units × $53 = $16,589
Expenses = $1,570
#### FIFO
Gross Profit = Sales – CoGS = $16,589 – $6,872 = $9,717
Pretax Income = Gross Profit – Expenses = $9,717 – $1,570 = $8,147
#### LIFO
Gross Profit = $16,589 – $6,940 = $9,649
Pretax Income = $9,649 – $1,570 = $8,079
#### Average Cost
Gross Profit = $16,589 – $6,902 = $9,687
Pretax Income = $9,687 – $1,570 = $8,117
### 3. Rank Methods by Income Taxes Paid
Assume higher pretax income leads to higher taxes.
Rank from **highest to lowest income taxes paid**: FIFO ($8,147), Average Cost ($8,117), LIFO ($8,079).
### **Summary Table**
| Method | CoGS | Pretax Income | Income Taxes Paid Rank |
|---------------|--------|---------------|-----------------------|
| FIFO | $6,872 | $8,147 | 1 (highest tax) |
| LIFO | $6,940 | $8,079 | 3 (lowest tax) |
| Average Cost | $6,902 | $8,117 | 2 |
### **Final Answers**
1. FIFO CoGS: $6,872; LIFO CoGS: $6,940; Average Cost CoGS: $6,902
2. FIFO Pretax Income: $8,147; LIFO Pretax Income: $8,079; Average Cost Pretax Income: $8,117
3. Rank for taxes paid: FIFO (1), Average Cost (2), LIFO (3)
If you provide the actual inventory data, I can recalculate with the real numbers.
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