Emily Company uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current ye accounting records provided the following information for product 2: Inventory, December 31, prior year For the current year: Purchase, April 11 Units Unit Cost 2,820 $ 14 9,000 15 7,910 20 10,870 Operating expenses (excluding income tax expense) $ 189,000 Purchase, June 1 Sales ($57 each) Required: 1. Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Cas LIFO. 2. Compute the difference between the pretax income and the ending inventory amount for the two cases. 3. Which inventory costing method may be preferred for income tax purposes?
Emily Company uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current ye accounting records provided the following information for product 2: Inventory, December 31, prior year For the current year: Purchase, April 11 Units Unit Cost 2,820 $ 14 9,000 15 7,910 20 10,870 Operating expenses (excluding income tax expense) $ 189,000 Purchase, June 1 Sales ($57 each) Required: 1. Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Cas LIFO. 2. Compute the difference between the pretax income and the ending inventory amount for the two cases. 3. Which inventory costing method may be preferred for income tax purposes?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Emily Company uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year,
accounting records provided the following information for product 2:
Inventory, December 31, prior year
For the current year:
Purchase, April 11
Units
2,820
Unit Cost
$ 14
9,000
15
7,910
20
Sales ($57 each)
10,870
Operating expenses (excluding income tax expense)
$ 189,000
Purchase, June 1
ces
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.
2. Compute the difference between the pretax income and the ending inventory amount for the two cases.
3. Which inventory costing method may be preferred for income tax purposes?
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