E7-11 (Algo) Choosing LIFO versus FIFO When Costs Are Rising and Falling [LO 7-3] Use the following information to complete this exercise: sales, 550 units for $16,950; beginning inventory, 300 units; purchases, 400 units; ending inventory, 150 units; and operating expenses, $7,000. Required: 1. Complete the table for each situation. In Situations A and B (costs rising), assume the following: beginning inventory, 300 units at $15 $4,500; purchases, 400 units at $17 $6,800. In Situations C and D (costs falling), assume the opposite; that is, beginning inventory, 300 units at $17 $5,100; purchases, 400 units at $15-$6,000. Use periodic inventory procedures. Costs Rising Costs Falling Situation A Situation B FIFO LIFO Situation C FIFO Situation D LIFO Sales Revenue $ 16,950 $ 16,950 $ 16,950 $ 16.950 Beginning Inventory $ 4,500 $ 4,500 Purchases 6,800 6,800 Goods Available for Sale 11,300 11,300 0 0 Ending Inventory 2,550 Cost of Goods Sold 8,750 11,300 0 Gross Profit 8,200 Operating Expenses 7,000 7,000 7,000 7,000 Income from Operations 1,200 Income Tax Expense (30%) 360 Net Income $ 840 Costs Rising Costs Falling Situation A Situation B Situation C Situation D FIFO LIFO FIFO LIFO Sales Revenue $ 16,950 $ 16,950 $ 16,950 S 16,950 Beginning Inventory $ 4,500 $ 4,500 Purchases 6,800 6,800 Goods Available for Sale 11,300 11,300 0 Ending Inventory 2,550 Cost of Goods Sold 8,750 11,300 0 0 Gross Profit 8.200 Operating Expenses 7,000 7,000 7,000 7,000 Income from Operations 1,200 Income Tax Expense (30%) 360 Net Income $ 840