# Income Statement at Specific Month

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"Income Statement at Specific Month"

```					                                                                   Student Name:
Class:
Problem 07-03

Requirement 1:
ATLANTA COMPANY
Partial Income Statement
For the Month Ended January 31, 2010

(a)                    (b)           (c)           (d)
Weighted                                          Specific
Average                 FIFO         LIFO       Identification
Sales revenue*
Cost of goods sold**
Gross profit

Note: See computations below
ATLANTA COMPANY
Computations

*Sales revenue:
Units
Cost
Revenue

**Cost of goods sold:                                     Weighted                                     Specific
Units               Average        FIFO           LIFO         Identification
Beginning inventory
Purchases (net)***
Goods available for sale
Ending inventory****
Cost of goods sold
Student Name:
Class:
Problem 07-03

Requirement 1:

***Purchases:                                    Dollar
Units   Cost     Amount
January 12
January 26
Totals

****Ending inventory:

(a) Weighted-average:          Units   Amount
Beginning inventory
Purchases
Totals

Average cost
Ending inventory

(b) FIFO:                      Units   Cost        Total

Ending inventory

(c) LIFO:                      Units   Cost        Total

Ending inventory

(d) Specific identification:   Units   Cost        Total

Ending inventory
Student Name:
Class:
Problem 07-03

Requirement 1:
Requirement 2:

Requirement 3:

Requirement 4:
Given Data P07-03:

ATLANTA COMPANY

Transactions          Units       Amount

Inventory, January 1, 2010    500    \$            2,500
Purchase, January 12          600                 3,600
Purchase, January 26          160                 1,280

Sale                         (370)
Sale                         (250)
Student Name:
Class:
Problem 07-05

Requirement 1:
INVENTORY
Comparison Income Statements

Prices Rising         Prices Falling
FIFO        LIFO       FIFO       LIFO
Sales revenue (500 units)
Cost of goods sold:
Beginning inventory (300 units)
Purchases (400 units)
Goods available for sale
Ending inventory (200 units)*
Cost of goods sold (500 units)
Gross profit
Expenses
Pretax income
Income tax expense (30%)
Net income

*Inventory computations:
Units       Cost       Total
(a)   FIFO
(b)   LIFO
(c)   FIFO
(d)   LIFO
Student Name:
Class:
Problem 07-05

Requirement 2:

Requirement 3:

Requirement 4:
Given Data P07-05:

Prices Rising              Prices Falling
Situation A Situation B Situation C Situation D
FIFO           LIFO         FIFO           LIFO
Sales revenue                                   \$12,000        \$12,000      \$12,000        \$12,000
Cost of goods sold:
Beginning inventory                              3,300         ?            ?              ?
Purchases                                        4,800         ?            ?              ?
Goods available for sale                           8,100         ?            ?              ?
Ending inventory                                   2,400         ?            ?              ?
Cost of goods sold                                 5,700         ?            ?              ?
Gross profit                                       6,300         ?            ?              ?
Expenses                                           4,000         4,000        4,000          4,000
Pretax income                                      2,300         ?            ?              ?
Income tax expense (30%)                             690         ?            ?              ?
Net income                                        \$1,610         ?            ?              ?

Data common to all 4 situations:
Sales in units                                      500
Dollar amount of sales                         \$ 12,000
Beginning inventory in units                        300
Purchases in units                                  400
Ending inventory in units                           200
Operating expenses                             \$ 4,000

Per         Number
Data for Situations A and B (Prices Rising)                     Unit        of Units       Total
Beginning inventory                                        \$           11       300    \$    3,300
Purchases                                                  \$           12       400         4,800

Per         Number
Data for Situations C and D (Prices Falling)                    Unit        of Units       Total
Beginning inventory                                        \$           12       300    \$    3,600
Purchases                                                  \$           11       400         4,400
Student Name:
Class:
Problem 07-06

Requirement 1:
SMART COMPANY
Income Statement (LCM basis)
For the Year Ended December 31, 2010

Sales revenue
Cost of goods sold
Beginning inventory
Purchases
Goods available for sale
Ending inventory
Cost of goods sold
Gross profit
Operating expenses
Pretax income
Income tax expense
Net income

Computation of ending inventory on LCM basis:

Replacement         LCM
Item      Quantity             Original cost                     Cost (Market)     Valuation
A                  X               =                 X                =
B                  X               =                 X                =
C                  X               =                 X                =
D                  X               =                 X                =

LCM inventory valuation

Requirement 2:

Amount
FIFO                LCM         of Change
Item Changed           Cost Basis            Basis       (Decrease)
Ending inventory
Cost of goods sold
Gross profit
Pretax income
Income tax expense
Net income
Requirement 3:

Requirement 4:
Given Data P07-06:

SMART COMPANY
Income Statement
December 31, 2010

Sales Revenue                              \$ 280,000
Cost of goods sold
Beginning inventory             31,000
Purchases                      184,000
Goods available for sale     215,000
Ending inventory                46,500
Cost of goods sold                      168,500
Gross profit                                111,500
Operating expenses                           62,000
Pretax income                                49,500
Income tax expense (30%)                   14,850
Net income                                  \$34,650

SMART COMPANY
2010 Ending Inventory
Current
Acquisition      Replacement
Cost            Unit Cost
Item          Quantity         Unit        Total     (Market)
A            3,050           \$3.0         \$9,150         \$4.0
B            1,500            5.0          7,500          3.5
C            7,100            1.5         10,650          3.5
D            3,200            6.0         19,200          4.0
\$46,500
Student Name:
Class:
Problem 07-09

Requirement 1:
SHERWOOD COMPANY
Income Statement Corrected

2009            2010           2011         2012
Sales revenue
Cost of goods sold
Gross profit
Expenses
Pretax income
Income tax expense (30%)
Net income

Requirement 2:
SHERWOOD COMPANY
Gross Profit Ratio

2009            2010           2011         2012
Before correction

After correction

Requirement 3:
SHERWOOD COMPANY
Effect of Error on Income Tax Expense

2010           2011
Income tax expense reported
Correct income tax expense
Income tax expense overstatement
(understatement)
Given Data P07-09:

SHERWOOD COMPANY
Income Statement - Uncorrected

2009             2010          2011          2012
Sales revenue               \$ 2,025,000      \$ 2,450,000   \$ 2,700,000   \$ 2,975,000
Cost of goods sold            1,505,000        1,627,000     1,782,000     2,113,000
Gross margin                    520,000          823,000       918,000       862,000
Expenses                        490,000          513,000       538,000       542,000
Pretax income                    30,000          310,000       380,000       320,000
Income tax expense (30%)          9,000           93,000       114,000        96,000
Net Income                      \$21,000         \$217,000      \$266,000      \$224,000

Overstatement of inventory - Dec. 31, 2010                               \$   22,000

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