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Emily Company uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided the following information for product 2: Inventory, December 31, prior year For the current year: Purchase, April 11 Purchase, June 1 Sales ($57 each) Operating expenses (excluding income tax expense) $ 188,500 Cost of goods sold: Goods available for sale Cost of goods sold EMILY COMPANY Income Statement For the Year Ended December 31, current year Case A FIFO Pretax income Ending inventory 0 Units Comparison of Amounts Case B LIFO Case A FIFO 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. Case B LIFO 0 Unit Cost 2,890 Difference 8,960 7,950 10,870 $ 13 2. Compute the difference between the pretax income and the ending inventory amount for the two cases. 14 19

Emily Company uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided the following information for product 2: Inventory, December 31, prior year For the current year: Purchase, April 11 Purchase, June 1 Sales ($57 each) Operating expenses (excluding income tax expense) $ 188,500 Cost of goods sold: Goods available for sale Cost of goods sold EMILY COMPANY Income Statement For the Year Ended December 31, current year Case A FIFO Pretax income Ending inventory 0 Units Comparison of Amounts Case B LIFO Case A FIFO 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. Case B LIFO 0 Unit Cost 2,890 Difference 8,960 7,950 10,870 $ 13 2. Compute the difference between the pretax income and the ending inventory amount for the two cases. 14 19

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Emily Company uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided the following information for product 2: Inventory, December 31, prior year For the current year: Purchase, April 11 Purchase, June 1 Sales ($57 each) Operating expenses (excluding income tax expense) $ 188,500 Cost of goods sold: Goods available for sale Cost of goods sold EMILY COMPANY Income Statement For the Year Ended December 31, current year Case A FIFO Pretax income Ending inventory 0 Units Comparison of Amounts Case B LIFO Case A FIFO 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. Case B LIFO 0 Unit Cost 2,890 Difference 8,960 7,950 10,870 2. Compute the difference between the pretax income and the ending inventory amount for the two cases. $ 13 14 19 Which inventory costing method may be preferred for income tax purposes? 3. Which inventory costing method may be preferred for income tax purposes?
Transcribed Image Text:Emily Company uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided the following information for product 2: Inventory, December 31, prior year For the current year: Purchase, April 11 Purchase, June 1 Sales ($57 each) Operating expenses (excluding income tax expense) $ 188,500 Cost of goods sold: Goods available for sale Cost of goods sold EMILY COMPANY Income Statement For the Year Ended December 31, current year Case A FIFO Pretax income Ending inventory 0 Units Comparison of Amounts Case B LIFO Case A FIFO 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. Case B LIFO 0 Unit Cost 2,890 Difference 8,960 7,950 10,870 2. Compute the difference between the pretax income and the ending inventory amount for the two cases. $ 13 14 19 Which inventory costing method may be preferred for income tax purposes? 3. Which inventory costing method may be preferred for income tax purposes?
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