Givoly Incorporated uses a periodic inventory system. At the end of the annual accounting period, December 31
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Question:
Givoly Incorporated 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 | 7,500 | $ 13 | |
For the current year: | |||
Purchase, March 5 | 19,500 | 11 | |
Purchase, September 19 | 10,500 | 7 | |
Sale ($28 each) | 8,500 | ||
Sale ($30 each) | 16,500 | ||
Operating expenses (excluding income tax expense) | $ 405,000 |
Required:
Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Case B: LIFO.
Compute the difference between the pretax income and the ending inventory amounts for the two cases.
Which inventory costing method may be preferred for income tax purposes?
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