Use the following information to answer Part A and Part B of Problem 1. At the beginning of the current period, Chen carried 1,000 units of its product with a unit cost of $32. A summary of purchases during the current period follows. Also, during the current period, Chen sold 3,500 units. Cost Beginning Inventory Purchases: #1 #2 Units 1,000 1,800 800 Unit Cost 32 34 35 32,000 61,200 30,400 18,500 23,400 49,200 500 37 #3 #4 #5 39 600 900 41 A) Using both FIFO and LIFO methods, compute both cost of goods sold for the current period and the ending inventory balance. Use the financial statement effects template to record the cost of goods sold for the period. B) What cumulative effect has the use of LIFO inventory costing had on Chen's pretax income compared with the pretax income it would have reported had it used FIFO inventory costing for all its inventories? Show the calculation. C) If inventory costs are declining, which inventory method yields the (a) lowest ending inventory? (b) greatest costs of goods sold, and (c) largest net income? assuming the same method is used for tax purposes? Explain your answer. |