Question

Emily 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 information [The following information applies to the questions displayed below.] Emily 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: Units 2,830 Unit Cost $13 Inventory, December 31, prior year For the current year: Purchase, April 11 Purchase, June 1 Sales ($56 each) Operating expenses (excluding income tax expense) 8,830 7,850 10,810 14 19 $185,500 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. EMILY COMPANY Income Statement For the Year Ended December 31, current year Case A Case B FIFO L IFO Cost of goods sold: Goods available for sale Cost of goods sold

Answer 1

	Case A		Case B
	FIFO		LIFO
Sales revenue		605360		605360
Cost of goods sold
Beginning inventory	36790		36790
Purchases	272770		272770
Goods available for sale	309560		309560
Ending inventory	161050		118970
Cost of goods sold		148510		190590
Gross Profit		456850		414770
Operating expenses		185500		185500
Pretax income		271350		229270

Workings:
Sales revenue	605360	=10810*56
Beginning inventory	36790	=2830*13
Purchases	272770	=(8830*14)+(7850*19)
Ending inventory units	8700	=2830+8830+7850-10810
Ending inventory:
FIFO	161050	=(7850*19)+(8700-7850)*14
LIFO	118970	=(2830*13)+(8700-2830)*14