Johnson Ltd. began operations on January l, 2012. Merchandise purchases and four alternative methods of valuing inventory for the first two years of operations are summarized below:
Required:
a. Which of the four methods listed above does not apply the matching principle? Briefly explain.
b. Determine the cost flow assumption or inventory valuation method that would report the highest net income for 2012.
c. Assuming that FIFO had been used for both years, how much would the cost of goods sold be for 2013?

Question

Johnson Ltd. began operations on January l, 2012. Merchandise purchases and four alternative methods of valuing inventory for the first two years of operations are summarized below:
  Required:
a. Which of the four methods listed above does not apply the matching principle? Briefly explain.
b. Determine the cost flow assumption or inventory valuation method that would report the highest net income for 2012.
c. Assuming that FIFO had been used for both years, how much would the cost of goods sold be for 2013?

Quizplus · Accepted Answer

The Answer of Johnson Ltd. began operations on January l, 2012. Merchandise purchases and four alternative methods of valuing inventory for the first two years of operations are summarized below:
  Required:
a. Which of the four methods listed above does not apply the matching principle? Briefly explain.
b. Determine the cost flow assumption or inventory valuation method that would report the highest net income for 2012.
c. Assuming that FIFO had been used for both years, how much would the cost of goods sold be for 2013?