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 (7,000units) $14,000 Total net sales (223,000units) $992,350 Ending (14,000units) Total cost of goods purchased (230,000units) 572,000 Purchases were made quarterly as follows Quarter Units Unit Cost Total Cost 1 60,000 $2 30 $138,000 2 50,000 2 40 120,000 3 50,000 2 50 125,000 4 70,000 2 70 189,000 230,000 $572,000 Operating expenses were $100,000, and the companys income tax rate is40 Prepare comparative condensed income statements for 2017 under FIFO and LIFO GRESA INC Condensed Income Statements For the Month Ended December 31, 2017December 31, 2017For the Year Ended December 31, 2017 FIFO LIFO Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit (Loss)Income before Income TaxesIncome Tax ExpenseNet Income (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues $ $ Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit (Loss)Income before Income TaxesIncome Tax ExpenseNet Income (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit (Loss)Income before Income TaxesIncome Tax ExpenseNet Income (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit (Loss)Income before Income TaxesIncome Tax ExpenseNet Income (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit (Loss)Income before Income TaxesIncome Tax ExpenseNet Income (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit (Loss)Income before Income TaxesIncome Tax ExpenseNet Income (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit (Loss)Income before Income TaxesIncome Tax ExpenseNet Income (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit (Loss)Income before Income TaxesIncome Tax ExpenseNet Income (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit (Loss)Income before Income TaxesIncome Tax ExpenseNet Income (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit (Loss)Income before Income TaxesIncome Tax ExpenseNet Income (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit (Loss)Income before Income TaxesIncome Tax ExpenseNet Income (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit (Loss)Income before Income TaxesIncome Tax ExpenseNet Income (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues $ $

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jun 28, 2024

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

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 (7,000units)	$14,000	Total net sales (223,000units)	$992,350
Ending (14,000units)	Total cost of goods purchased (230,000units)	572,000

Purchases were made quarterly as follows.

Quarter	Units	Unit Cost	Total Cost
1	60,000	$2.30	$138,000
2	50,000	2.40	120,000
3	50,000	2.50	125,000
4	70,000	2.70	189,000
230,000	$572,000

Operating expenses were $100,000, and the companys income tax rate is40%.

Prepare comparative condensed income statements for 2017 under FIFO and LIFO.

GRESA INC. Condensed Income Statements For the Month Ended December 31, 2017December 31, 2017For the Year Ended December 31, 2017
FIFO	LIFO
Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit / (Loss)Income before Income TaxesIncome Tax ExpenseNet Income / (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues	$	$
Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit / (Loss)Income before Income TaxesIncome Tax ExpenseNet Income / (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues
Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit / (Loss)Income before Income TaxesIncome Tax ExpenseNet Income / (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues
Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit / (Loss)Income before Income TaxesIncome Tax ExpenseNet Income / (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues
Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit / (Loss)Income before Income TaxesIncome Tax ExpenseNet Income / (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues
Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit / (Loss)Income before Income TaxesIncome Tax ExpenseNet Income / (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues
Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit / (Loss)Income before Income TaxesIncome Tax ExpenseNet Income / (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues
Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit / (Loss)Income before Income TaxesIncome Tax ExpenseNet Income / (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues
Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit / (Loss)Income before Income TaxesIncome Tax ExpenseNet Income / (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues
Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit / (Loss)Income before Income TaxesIncome Tax ExpenseNet Income / (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues
Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit / (Loss)Income before Income TaxesIncome Tax ExpenseNet Income / (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues
Beginning InventoryCost of Goods Available for SaleCost of Goods PurchasedCost of Goods SoldDividendsEnding InventoryExpensesGross Profit / (Loss)Income before Income TaxesIncome Tax ExpenseNet Income / (Loss)Operating ExpensesRetained Earnings, January 1Retained Earnings, December 31Sales RevenuesTotal ExpensesTotal Sales Revenues	$	$