Problem 6-4A (Part Level Submission)

The management of Gresa Inc. is reevaluating the appropriateness of using its present inventory cost flow method, which is average-cost. The company requests your help in determining the results of operations for 2017 if either the FIFO or the LIFO method had been used. For 2017, the accounting records show these data:

Inventories				Purchases and Sales
Beginning (5,000 units)		$10,000		Total net sales (238,000 units)		$1,190,000
Ending (17,000 units)				Total cost of goods purchased (250,000 units)		571,500

Purchases were made quarterly as follows.

Quarter		Units		Unit Cost		Total Cost
1		65,000		$2.10		$136,500
2		55,000		2.20		121,000
3		55,000		2.30		126,500
4		75,000		2.50		187,500
		250,000				$571,500

Operating expenses were $100,000, and the companys income tax rate is 40%.\

(a) Your answer is correct. Prepare comparative condensed income statements for 2017 under FIFO and LIFO. GRESA INC. Condensed Income Statements For the Year Ended December 31, 2017 FIFO LIFO Sales Revenues 1,190,000 1,190,000 Cost of Goods Sold Beginning Inventory 10,000 10,000 Cost of Goods Purchased 571,500 571,500 Ending Inventory -42,5001 -35,200 Cost of Goods Sold 539,000 546,300 1