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:

			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		?		?

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