Dear Tomo,
Thank you for your seventh message. My comments follow.
This week we will finish the income statement. The next lesson is at:
http://www72.homepage.villanova.edu/susan.stiner/cgu/income201.htm
Sincerely,
Prof. Sue Stiner
Tomoko Iiduka wrote:
Dear. Prof. Stiner,
Thank you for your seventh message.
Congratulations! I want see the wedding.
I saw the web page for the Income Statement--Part 1.
Ø 1. What is the format for an American Income Statement?
Answer: It is the following.
Revenue
Less: Expenses
Equals: Net Income or Loss
> 2．What is the amount of gross margin if Beach Toys, Inc used LIFO, not FIFO, to value inventory?
Answer: It's value is $15,000.
.>Cost of Goods Sold is $15,000 under LIFO. So gross margin is $15,000.
> 3. Is the purchase price of inventory rising or falling?
Answer: It is rising, because the first purchase is $100 per unit, the second
purchase is $120 per unit, and the third purchase is $150 per unit.
That is why the purchase price is rising.
> 4. Which inventory method (LIFO or FIFO) is better for Beach Toys, Inc to use?
> "Better" means "results in lower income tax."
Answer: LIFO is better because the value of the gross margin under LIFO is
$15,000 and the value of the gross margin under FIFO is $20,000.
>Because the gross is smaller under LIFO, net profit will also
>be smaller. Therefore, a smaller amount of income tax is paid under
>LIFO.
>Thank you for the vocabulary words.
> Sincerely,
> Tomo.