Lesson
7
Dear
Taka,
Thank you for your seventh message. My comments follow.
Sincerely,
Prof. Sue Garreis
Dear Professor Garreis,
Thank you for your reply and corrections of my English.
I will answer your last question.
【Homework】
1. What is the format for an American Income
Statement?
→ American Income Statement format is
revenue less cost of goods sold
equals gross margin, and then less operating
expenses equals net
income(loss).
Correct!
2. Use your words to tell me how to calculate
cost of goods sold. Please
do not use any numbers.
→
Two of the ways to calculate cost of goods sold are FIFO and LIFO.
Not
quite. FIFO or LIFO let us find the value of the beginning and ending inventory.
The inventory at the beginning of the period plus
the inventory bought during this season less the ending inventory equals the
cost of goods sold.
This
is the correct answer.
3. Did Beach Toys use LIFO or FIFO to calculate the cost of goods sold?
→ Beach Toys used FIFO to calculate the cost of goods
sold.
Correct!
4. Does the purchase price of inventory rise
or fall for Beach Toys, Inc?
→ Beach Toys the purchase price of inventory
did fall.
For Beach Toys the purchase price of inventory
did rise.
First purchase = $100 per unit
Second purchase = $120 per unit.
Third purchase = $150 per unit.
The use of FIFO or LIFO does not make the
inventory purchase price rise or fall.
Ordinary market forces make the prices rise or fall.
Some of the market forces are cost of raw materials, cost of labor, and demand
for the item.
5. Which inventory method (LIFO or FIFO) is
better for Beach Toys, Inc to use?
"Better"
means "results in lower income tax."
→ Beach Toys
made purchases when prices were rising, so LIFO is better.
Correct!
6. How easy was this lesson for you?
→ The accounting was about right.
→ The English was somewhat hard.
→ Finding and using the linked web pages was
about right.
Thank you for the feedback.
【Vocabulary】
Thank you for the vocabulary list.
I'm waiting for your reply.
Sincerely. Taka