Question

Broadhead Company 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:

 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.

Answer 1

• All working forms part of the answer
• Workings

FIFO	Cost of Goods available for sale			Cost of Goods Sold			Ending Inventory
	Units	Cost/unit	COG for sale	Units sold	Cost/unit	COGS	Units	Cost/unit	Ending inventory
Beginning Inventory	2930	$                12.00	$                      35,160.00	2930	$         12.00	$        35,160.00	0	$        12.00	$                         -
Purchases:
11-Apr	8870	$                10.00	$                      88,700.00	7950	$         10.00	$        79,500.00	920	$        10.00	$            9,200.00
01-Jun	7990	$                15.00	$                    119,850.00		$         15.00	$                        -	7990	$        15.00	$        119,850.00
TOTAL	19790		$                    243,710.00	10880		$      114,660.00	8910		$        129,050.00

LIFO	Cost of Goods available for sale			Cost of Goods Sold			Ending Inventory
	Units	Cost/unit	COG for sale	Units sold	Cost/unit	COGS	Units	Cost/unit	Ending inventory
Beginning Inventory	2930	$                12.00	$                      35,160.00		$         12.00	$                        -	2930	$        12.00	$          35,160.00
Purchases:	0	$                       -	$                                     -
11-Apr	8870	$                10.00	$                      88,700.00	2890	$         10.00	$        28,900.00	5980	$        10.00	$          59,800.00
01-Jun	7990	$                15.00	$                    119,850.00	7990	$         15.00	$      119,850.00	0	$        15.00	$                         -
TOTAL	19790		$                    243,710.00	10880		$      148,750.00	8910		$          94,960.00

• Answers [with the help of above workings]

	FIFO		LIFO
Sales Revenue		$        609,280.00		$        609,280.00
Cost of Goods Sold:
Beginning Inventory	$            35,160.00		$           35,160.00
Purchases	$          208,550.00		$        208,550.00
Goods available for sale	$          243,710.00		$        243,710.00
Less: Ending Inventory	$          129,050.00		$           94,960.00
Cost of Goods Sold		$        114,660.00		$        148,750.00
Gross Profits		$        494,620.00		$        460,530.00
Operating Expenses		$        190,000.00		$        190,000.00
Pretax Income		$        304,620.00		$        270,530.00