The following information pertains to the inventory of Parvin
Company during Year 2:
| Jan. 1 | Beginning Inventory | 300 | units | @ | $ | 37 | |
| Apr. 1 | Purchased | 2,900 | units | @ | $ | 42 | |
| Oct. 1 | Purchased | 500 | units | @ | $ | 45 | |
During Year 2, Parvin sold 3,500 units of inventory at $80 per unit
and incurred $46,000 of operating expenses. Parvin currently uses
the FIFO method but is considering a change to LIFO. All
transactions are cash transactions. Assume a 30 percent income tax
rate. Parvin started the period with cash of $84,000, inventory of
$11,100, common stock of $59,000, and retained earnings of
$36,100.
Exercise 5-6A Part b
b. Prepare income statements using FIFO and LIFO.
Prepare income statement
| FIFO | LIFO | |||
| Sales (3500*80) | 280000 | 280000 | ||
| Cost of goods sold | ||||
| Beginning inventory (300*37) | 11100 | 11100 | ||
| Purchase | 144300 | 144300 | ||
| Cost of goods available for sale | 155400 | 155400 | ||
| Less: Ending inventory | -9000 | -7400 | ||
| Cost of goods sold | 146400 | 148000 | ||
| Gross profit | 133600 | 132000 | ||
| Operating expense | 46000 | 46000 | ||
| Operating income | 87600 | 86000 | ||
| Income before tax | 26280 | 25800 | ||
| Net income | 61320 | 60200 | ||
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