![Suppose a division of New York instruments that sells computer microchips has these inventory
records for January 2015 (Company accounting records show sales of 450 units for $9000
revenue. Operating expense for January was $1000):
Date Item Quantity Unit Cost Total Cost
Jan 1 Beg. Inventory 180 unit $15 $2700
Jan 6 Purchase 70 unit 17 1190
Jan 21 Purchase 200 unit 17 3400
Jan 27 Purchase 90 unit 18 1620
Requirement 1: Prepare the January income statement, showing amounts for LIFO, average, and
FIFO cost. Label the bottom line "Operating Income." Round average cost per unitto three
decimal places and all other figures to whole-dollar amounts. Show your computations.
Begin by preparing the income statement using LIFO, then average, and finally FIFO cost.
New York Instruments Inc.
Income Statement for Microchip
Month Ended January 31, 2015
LIFO Average FIFO
Sales Revenue _________ _________ __________
Cost of goods sold _________ _________ __________
Gross profit _________ _________ __________
Operating expenses _________ _________ ___________
Operating income _________ _________ ___________
Requirement 2: Suppose you are the financial vice president of New York Instruments. Which
Method will you use if your motive is to...
A) Minimize income taxes?
Use ____________[FIFO,LIFO, or Average.] to minimize income taxes. Operating income
under this method is the lowest when inventory unit costs are ____________,[Decreasing or
Increasing] as they are in this case. (If inventory unit costs were going the opposite direction,
income under _____________ [FIFO, LIFO, or Average] would be lowest.)
B) report the highest income?
Use ____________ [FIFO, LIFO, or Average] to report the highest operating income. Income
under this method is highest when inventory unit costs are ___________ [Increasing or
decreasing], as in this situation.
C) Report operating income between the extremes of FIFO and LIFO?
Use ____________ [FIFO, LIFO, or Average] to report anoperating income amount between the
FIFO and LIFO extremes. This is true in this situation and in others when inventory unit costs](https://image.slidesharecdn.com/supposeadivisionofnewyorkinstrumentsthatsellscomputermicro-230327165742-263ead78/85/Suppose-a-division-of-New-York-instruments-that-sells-computer-micro-pdf-1-320.jpg)
![are ___________ [increasing, decreasing, or both].
D) Report inventory on the balance sheet at the most current cost?
Use _____________ [FIFO, LIFO, or Average] to report inventory on the balance sheet at the
most current cost. The ___________ [most current or oldest] inventory costs are expensed as
cost of goods sold, leaving in ending inventory the __________ [most current or oldest] costs of
the period.
E) Use ____________ [FIFO, LIFO, or Average] to attain the best measure of net income. This
method produces the best current expense recognition by matching the _________ [most current
or oldest] expense with current revenue. The __________ [most current or oldest] inventory
costs are expensed as cost of goods sold.
Solution](https://image.slidesharecdn.com/supposeadivisionofnewyorkinstrumentsthatsellscomputermicro-230327165742-263ead78/85/Suppose-a-division-of-New-York-instruments-that-sells-computer-micro-pdf-2-320.jpg)
Suppose a division of New York instruments that sells computer micro.pdf
- 1. Suppose a division of New York instruments that sells computer microchips has these inventory records for January 2015 (Company accounting records show sales of 450 units for $9000 revenue. Operating expense for January was $1000): Date Item Quantity Unit Cost Total Cost Jan 1 Beg. Inventory 180 unit $15 $2700 Jan 6 Purchase 70 unit 17 1190 Jan 21 Purchase 200 unit 17 3400 Jan 27 Purchase 90 unit 18 1620 Requirement 1: Prepare the January income statement, showing amounts for LIFO, average, and FIFO cost. Label the bottom line "Operating Income." Round average cost per unitto three decimal places and all other figures to whole-dollar amounts. Show your computations. Begin by preparing the income statement using LIFO, then average, and finally FIFO cost. New York Instruments Inc. Income Statement for Microchip Month Ended January 31, 2015 LIFO Average FIFO Sales Revenue _________ _________ __________ Cost of goods sold _________ _________ __________ Gross profit _________ _________ __________ Operating expenses _________ _________ ___________ Operating income _________ _________ ___________ Requirement 2: Suppose you are the financial vice president of New York Instruments. Which Method will you use if your motive is to... A) Minimize income taxes? Use ____________[FIFO,LIFO, or Average.] to minimize income taxes. Operating income under this method is the lowest when inventory unit costs are ____________,[Decreasing or Increasing] as they are in this case. (If inventory unit costs were going the opposite direction, income under _____________ [FIFO, LIFO, or Average] would be lowest.) B) report the highest income? Use ____________ [FIFO, LIFO, or Average] to report the highest operating income. Income under this method is highest when inventory unit costs are ___________ [Increasing or decreasing], as in this situation. C) Report operating income between the extremes of FIFO and LIFO? Use ____________ [FIFO, LIFO, or Average] to report anoperating income amount between the FIFO and LIFO extremes. This is true in this situation and in others when inventory unit costs
- 2. are ___________ [increasing, decreasing, or both]. D) Report inventory on the balance sheet at the most current cost? Use _____________ [FIFO, LIFO, or Average] to report inventory on the balance sheet at the most current cost. The ___________ [most current or oldest] inventory costs are expensed as cost of goods sold, leaving in ending inventory the __________ [most current or oldest] costs of the period. E) Use ____________ [FIFO, LIFO, or Average] to attain the best measure of net income. This method produces the best current expense recognition by matching the _________ [most current or oldest] expense with current revenue. The __________ [most current or oldest] inventory costs are expensed as cost of goods sold. Solution