Question 1

Question 2:

Required information E7-7 (Algo) Analyzing and Interpreting the Financial Statement Effects of LIFO and FIFO LO7-2, 7-3 (The following information applies to the questions displayed below.) Emily Company 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 2,880 Unit Cost $ 13 Inventory, December 31, prior year For the current year: Purchase, April 11 Purchase, June 1 Sales ($55 each) Operating expenses (excluding income tax expense) 8,910 7,810 10,990 14 19 $194,000 Required: 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. EMILY COMPANY Income Statement For the Year Ended December 31, current year Case A Case B FIFO LIFO Cost of goods sold: Goods available for sale 0 0 Cost of goods sold 2. Compute the difference between the pretax income and the ending inventory amount for the two cases. Comparison of Amounts Case B Case A FIFO LIFO Difference Pretax income Ending inventory