r Check My Work The cost of inventory a taxpayer owns has a signficant impact on the taxable income of the taxpayer. Cost of goods sold, which is the largest single deduction for many businesses is calculated as follows Beginning inventory Add: Purchasos. Equals: Costs of goods available for sale Less: Ending inventory Equals: Cost of goods sold There are two common methods of inventory valuation used by taxpayers: first in, first out (FIFO) and last in, first out (LIFO). The FIfo method is based an the assumption that the first merchandise acquired is the first to be sold. Accordingly, the inventory on hand consists of the most recently acquired goods. Alternatively, when the taxpayer uses the LIFO method, it is assumed that the most recently acquired goods are soid first and the inventory on hand cansists of the earliest purchases. b. Calculate Lawrence's ending inventory and cost of goods sold using the Ufo inventory valuation method: Ending inventory Cost of goods sold x x Lawrence owns a small candy store that selis one type of candy. His beginning inventory of candy was made up of 10,000 bexes costing $1,50 per bor ( $15,000), and he made the following purchases of candy during the year: At the end of the year, Lawrence's inventory consisted of 16,000 bexes of candy. a. Calculate Lawrence's ending inventory and cost of goods sold using the fifo inventory valuation method. Feesbas r Check My Work is calculated as follows: Begining inventory Add Purchasea. Equals. Costs of goods avalabie for sale Less: Ending inventery Equals Cost of goods sold There are two common methods of inventory valuation used by taxpayers: first in first out (firo) and last in fint out (uro). The hiro method is bised on the assumption that the first merchandise acquired is the first to be sold. Accordingly, the inventory on Nand conaisti of the mont incently acquired poote