Question

Givoly Inc. uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided the following information for product 2:

 

			Units	Unit Cost
Inventory, December 31, prior year				6,800			$	8
For the current year:
Purchase, March 5				18,800				6
Purchase, September 19				9,800				2
Sale ($30 each)				8,000
Sale ($32 each)				15,800
Operating expenses (excluding income tax expense)	$	398,000

 

Required:

1. Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Case B: LIFO. (Loss amounts should be indicated with a minus sign.)

 

Answer 1

FIFO IS first in first out

Total sales = 8000+15800=23800    (6800sold from beginning and 15000 from March 5 purchase)

cost of goods sold = 6800*$8+ 17000*6

= 156,400

ending inventory = beginning+ purchase - sold

=54,400+(18800*6+9800*2) - 156,400

=54,400+132,400 - 156,400

= 30,400

 

LIFO last in first out

sales=23800

cost of goods sold=9800*2 + 14000*6     (23800-9800 = 14000sold from march 5 purchase)

                              = 103,600

Ending inventory = 54,400 + 132,400 -  103,600

                             = 83,200

 

 

Total sales = 8000+15800=23800    (6800sold from beginning and 15000 from March 5 purchase)