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	6,300
For the current year:
Purchase, March 5	18,300	11
Purchase, September 19	9,300	7
Sale ( $30 each)	8,500
Sale ( $32 each)	15,300
Operating expenses (excluding income tax expense)	$393,000

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

Income statement

	Case A		Case B
	FIFO		LIFO
Sales (8500*30+15300*32)		744600		744600
Cost of goods sold
Beginning inventory (6300*13)	81900		81900
Purchase	266400		266400
Cost of goods available for sale	348300		348300
Less: Ending inventory	73900		123700
Cost of goods sold		274400		224600
Gross profit		470200		520000
Operating expense		393000		393000
Pretax income (loss)		77200		127000