Chapter 1 Problem 7-28
2006 2007 2008
Cost of sales – Average 1,500,000 2,000,000 2,400,000
Understatement of ending inventory:
2006 ( 150,000) 150,000
2007 ( 200,000) 200,000
2008 _______ ________ ( 270,000)
Cost of sales – FIFO 1,350,000 1,950,000 2,330,000
2006 2007 2008
Sales 3,000,000 4,000,000 4,800,000
Cost of sales – FIFO 1,350,000 1,950,000 2,330,000
Gross income 1,650,000 2,050,000 2,470,000
Operating expenses 800,000 900,000 1,000,000
Operating income 850,000 1,150,000 1,470,000
Proof
Net income – Average 700,000 1,100,000 1,400,000
Understatement of ending inventory:
2006 150,000 ( 150,000)
2007 200,000 ( 200,000)
2008 _______ _____ 270,000
Net income – FIFO 850,000 1,150,000 1,470,000
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