Required information

P7-5 (Algo) Evaluating the LIFO and FIFO Choice When Costs Are Rising and Falling LO7-2, 7-3

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[The following information applies to the questions displayed below.] 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, 503 units for $19,114; beginning inventory, 296 units; purchases, 382 units; ending inventory, 175 units; and operating expenses, $3,500. The income tax rate is 35%.

P7-5 Part 1

Required:

1. Complete the following tabulation for each situation in Situations A and B (prices rising), assume the following: beginning inventory, 296 units at $10 = $2,960; purchases, 382 units at $11 = $4,202. In Situations C and D (prices falling), assume the opposite; that is, beginning inventory, 296 units at $11 = $3,256; purchases, 382 units at $10 = $3,820.Use periodic inventory procedures. (Round your answers to nearest dollar amount.)

Please include an explanation for each answer as well! Thank you so much!

Required information P7-5 (Algo) Evaluating the LIFO and FIFO Choice When Costs Are Rising and Falling L07-2, 7-3 [The following information applies to the questions displayed below.] 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, 503 units for $19,114; beginning inventory, 296 units, purchases, 382 units; ending inventory, 175 units, and operating expenses, $3,500. The income tax rate is 35%. P7-5 Part 1 Required: 1. Complete the following tabulation for each situation in Situations A and B (prices rising), assume the following: beginning inventory, 296 units at $10 = $2,960; purchases, 382 units at $11 = $4,202. In Situations C and D (prices falling), assume the opposite that is, beginning inventory, 296 units at $11 = $3,256; purchases, 382 units at $10 = $3,820.Use periodic inventory procedures. (Round your answers to nearest dollar amount.) X Answer is not complete. PRICES RISING Situation A A Situation B FIFO LIFO S 19. 114 $ 19,114 PRICES FALLING Situation C Situation D FIFO LIFO $ 19.114 $ 19,114 Sales revenue 2,960 3,256 2,960 x 3,820 o 7,076 Cost of goods sold Beginning inventory Purchases Goods available for sale Ending inventory Cost of goods sold Gross profit Expenses 4,202 7,162 1,925 5,237 2,960 4,202 7,162 2,992 X 4,170 X 14,944 x 3,500 11,444 X 4.005 X 13,877 3,500 3,500 Pretax income 3,500 10,377 3,632 6,745 Income tax expense Net income S $ 7,439 X