The following information pertains to Baxter Company for 2013:
Beginning inventory ......90 units @ $15
Units purchased .........320 units @ $19
Ending inventory consisted of 40 units. Baxter sold 370 units at $30 each. All purchases and sales were made with cash.
Required:
a. Compute the gross margin for Baxter Company using the following cost flow assumptions:
(1) FIFO,
(2) LIFO,
(3) Weighted average.
b. What is the dollar amount of difference in net income between using FIFO versus LIFO? (Ignore income tax considerations.)
c. Determine the cash flow from operating activities, using each of the three cost flow assumptions listed in Requirement a. Ignore the effect of income taxes. Explain why these cash flows have no differences.