Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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 6,800 $ 8
For the current year:
Purchase, March 5 18,800 6
Purchase, September 19 9,800 2
Sale ($30 each) 8,000
Sale ($32 each) 15,800
Operating expenses (excluding income tax expense) $ 398,000

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?

Complete this question by entering your answers in the tabs below.

  • Required 1
  • Required 2
  • Required 3

Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Case B: LIFO. Note: Loss amounts should be indicated with a minus sign.

GIVOLY INCORPORATED
Income Statement
For the Year Ended December 31, current year
Case A Case B
FIFO LIFO
Cost of goods sold:
Beginning inventory
Purchases
Purchases
Goods available for sale 0 0
Sales revenue
Cost of goods sold
Pretax income/loss

Complete this question by entering your answers in the tabs below.

  • Required 1
  • Required 2
  • Required 3

Compute the difference between the pretax income and the ending inventory amounts for the two cases.

Comparison of Amounts
Case A Case B Difference
FIFO LIFO
Pretax income
Ending inventory

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamental Cornerstones Of Managerial Accounting

Authors: Dan L. Heitger, Maryanne M. Mowen, Don R. Hansen

1st Edition

ISBN: 0324378068, 9780324378061

More Books

Students also viewed these Accounting questions