Question

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Beck 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				6,900			$	13
For the current year:
Purchase, March 5				18,900				11
Purchase, September 19				9,900				7
Sale ($29 each)				7,900
Sale ($31 each)				15,900
Operating expenses (excluding income tax expense)	$	399,000

2.

value:
4.28 points

Required information

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.)

     

References

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WorksheetLearning Objective: 07-02 Report inventory and cost of goods sold using the four inventory costing methods.

Difficulty: 3 HardLearning Objective: 07-03 Decide when the use of different inventory costing methods is beneficial to a company.

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3.

value:
4.28 points

Required information

2. Compute the difference between the pretax income and the ending inventory amounts for the two cases. (Negative amount should be indicated with a minus sign.)

Answer 1

1)
	Income Statement
				FIFO	LIFO
	Sales			$ 7,22,000.00	$ 7,22,000.00
Less:	Cost of Goods sold			$ -2,75,600.00	$ -2,22,200.00
	Gross Margin			$ 4,46,400.00	$ 4,99,800.00
Less:	Operating Expenses			$ -3,99,000.00	$ -3,99,000.00
	Pretax Income			$      47,400.00	$ 1,00,800.00

2)
			FIFO	LIFO	Difference
	Pretax Income		$ 47,400.00	$ 1,00,800.00	$ 53,400.00
	Ending Inventory		$ 91,300.00	$ 1,44,700.00	$ 53,400.00

Workings:

FIFO
Particulars				Units	Rates	Amount
Beginning Inventory				6900	$    13.00	$    89,700.00
Purchases			05-Mar	18900	$    11.00	$ 2,07,900.00
Purchases			19-Sep	9900	$      7.00	$    69,300.00
Cost of Goods Available for sale				35700		$ 3,66,900.00
Sales:
From	Beginning Inventory			6900	$    13.00	$    89,700.00
From	Purchases		05-Mar	16900	$    11.00	$ 1,85,900.00
Cost of Goods sold				23800		$ 2,75,600.00
Ending Inventory				11900		$    91,300.00
LIFO
Particulars				Units	Rates	Amount
Beginning Inventory				6900	$    13.00	$    89,700.00
Purchases			05-Mar	18900	$    11.00	$ 2,07,900.00
Purchases			19-Sep	9900	$      7.00	$    69,300.00
Cost of Goods Available for sale				35700		$ 3,66,900.00
Sales:
From	Purchases		19-Sep	9900	$      7.00	$    69,300.00
From	Purchases		05-Mar	13900	$    11.00	$ 1,52,900.00
Cost of Goods sold				23800		$ 2,22,200.00
Ending Inventory				11900		$ 1,44,700.00