Question

P7-5 (Algo) Evaluating the LIFO and FIFO Choice When Costs Are Rising and Falling LO7-2, 7-3...

P7-5 (Algo) Evaluating the LIFO and FIFO Choice When Costs Are Rising and Falling LO7-2, 7-3

[The following information applies to the questions displayed below.]

Income is to be evaluated under four different situations as follows:

a. Prices are rising:

(1) Situation A: FIFO is used.

(2) Situation B: LIFO is used.

b. Prices are falling:

(1) Situation C: FIFO is used.

(2) Situation D: LIFO is used.

The basic data common to all four situations are sales, 502 units for \$17,570; beginning inventory, 295 units; purchases, 393 units; ending inventory, 186 units; and operating expenses, \$3,600. The income tax rate is 35%.

P7-5 Part 1

Required:

1. Complete the following tabulation for each situation in Situations A and B (prices rising), assume the following: beginning inventory, 295 units at \$8 = \$2,360; purchases, 393 units at \$9 = \$3,537. In Situations C and D (prices falling), assume the opposite; that is, beginning inventory, 295 units at \$9 = \$2,655; purchases, 393 units at \$8 = \$3,144.Use periodic inventory procedures. (Round your answers to nearest dollar amount.)

 PRICES RISING PRICES FALLING Situation A Situation B Situation C Situation D FIFO LIFO FIFO LIFO Sales revenue \$17,570 \$17,570 \$17,570 \$17,570 Cost of goods sold: Beginning inventory 2,360 Purchases 3,537 Goods available for sale 5,897 Ending inventory 1,674 Cost of goods sold 4,223 Gross profit 13,347 Expenses 3,600 3,600 3,600 3,600 Pretax income 9,747 Income tax expense 3,411 Net income \$6,336

Note: I have provided rounding off amounts upto 2 decimal places. You can round off your answers if required.

Earn Coins

Coins can be redeemed for fabulous gifts.