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Inventory Methods - LIFO and FIFO

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K. Co. uses LIFO inventory method. At the end of the 2006 accounting period, the company reported $10,000 of net earnings on I/S. The inventory balance on the 2006 B/S is $7,000. In the footnotes, LIFO's reserve at the end of 2006 is $3,000 and LIFO's reserve at the end of 2005 is $2,500. JJ Co. uses FIFO and reported 10,300 of net earnings on the 2006 I/S. Which company would have higher earnings if both of the companies used the same inventory method?

A. KK
B. JJ
C. Cannot determine

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C. Cannot determine

This is impossible to determine unless we know if they're both going to use FIFO or LIFO. ...

Solution Summary

This solution explains which company would have higher earnings if both of the companies used the same inventory method.

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Inventory Valuation- LIFO, FIFO, average cost

Use the following information for questions 12 -15.
A company just starting business made the following four inventory purchases in June:
June 1 150 units $ 750
June 10 200 units 1,200
June 15 200 units 1,260
June 28 150 units 990
$4,200
A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand.

12. Using the LIFO inventory method, the value of the ending inventory on
June 30 is
a. $1,350.
b. $1,620.
c. $2,580.
d. $2,850.

13. Using the FIFO inventory method, the amount allocated to cost of goods sold for June is
a. $1,620.
b. $1,350.
c. $2,580.
d. $2,850.

14. Using the average cost method, the amount allocated to the ending inventory on June 30 is
a. $4,200.
b. $2,700.
c. $1,495.
d. $1,500.

15. The inventory method which results in the highest gross profit for June is
a. the FIFO method.
b. the LIFO method.
c. the weighted average unit cost method.
d. not determinable.

Please see the attached questions

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