Question
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
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, 530 units for $15,900; beginning inventory, 310 units; purchases, 380 units; ending inventory, 160 units; and operating expenses, $3,900. The income tax rate is 30%. Required: Complete the following tabulation for each situation. In Situations A and B (prices rising), assume the following: beginning inventory, 310 units at $10 = $3,100; purchases, 380 units at $12 = $4,560. In Situations C and D (prices falling), assume the opposite; that is, beginning inventory, 310 units at $12 = $3,720; purchases, 380 units at $10 = $3,800. Use periodic inventory procedures.
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