Question
Givoly Inc. uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided
Givoly Inc. 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 | 7,900 | $ | 11 | ||||||
For the current year: | |||||||||
Purchase, March 5 | 19,900 | 9 | |||||||
Purchase, September 19 | 10,900 | 5 | |||||||
Sale ($27 each) | 8,900 | ||||||||
Sale ($29 each) | 16,900 | ||||||||
Operating expenses (excluding income tax expense) | $ | 409,000 |
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.
2. Compute the difference between the pretax income and the ending inventory amounts for the two cases.
Comparison Amounts
Case A Case B
FIFO LIFO Difference
Pretax Income
Ending Inventory
3. Which inventory costing method may be preferred for income tax purposes?
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