Question

Emily Company uses a periodic inventory system. At the end of the annual accounting period, December...

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 Unit Cost
Inventory, December 31, prior year 2,890 $ 12
For the current year:
Purchase, April 11 8,860 13
Purchase, June 1 7,930 18
Sales ($55 each) 10,860
Operating expenses (excluding income tax expense) $ 191,500

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 LIFO
Sales revenue $597,300 $597,300
Cost of goods sold:
Beginning inventory $34,680 $34,680
Purchases 257,920 257,920
Goods available for sale 292,600 292,600
Ending inventory 154,310 111,770
Cost of goods sold ? ?
Gross profit

?

?
Operating expenses ? ?
Pretax income ? ?

Homework Answers

Answer #1

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 LIFO
Sales revenue $597,300 $597,300
Cost of goods sold:
Beginning inventory $34,680 $34,680
Purchases 257,920 257,920
Goods available for sale 292,600 292,600
Ending inventory 154,310 111,770
Cost of goods sold 138290 180830
Gross profit

459010

416470
Operating expenses 191500 191500
Pretax income 267510 224970
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