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Givoly Incorporated 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, March 5 Units 6,400 $ 394,000 18,400 9,400 8,400 15,400 Unit Cost $ 12 Purchase, September 19 Sale ($29 each) Sale ($31 each) Operating expenses (excluding income tax expense) 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. 10 6 2. Compute the difference between the pretax income and the ending inventory amounts for the two cases. 3. Which inventory costing method may be preferred for income tax purposes?

Givoly Incorporated 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, March 5 Units 6,400 $ 394,000 18,400 9,400 8,400 15,400 Unit Cost $ 12 Purchase, September 19 Sale ($29 each) Sale ($31 each) Operating expenses (excluding income tax expense) 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. 10 6 2. Compute the difference between the pretax income and the ending inventory amounts for the two cases. 3. Which inventory costing method may be preferred for income tax purposes?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Givoly Incorporated 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, March 5 Purchase, September 19 Sale ($29 each) Sale ($31 each) Operating expenses (excluding income tax expense) $ 394,000 Units 6,400 18,400 9,400 8,400 15,400 Unit Cost $ 12 10 6 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 amounts for the two cases. 3. Which inventory costing method may be preferred for income tax purposes?
Transcribed Image Text:Givoly Incorporated 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, March 5 Purchase, September 19 Sale ($29 each) Sale ($31 each) Operating expenses (excluding income tax expense) $ 394,000 Units 6,400 18,400 9,400 8,400 15,400 Unit Cost $ 12 10 6 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 amounts for the two cases. 3. Which inventory costing method may be preferred for income tax purposes?
Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the difference between the pretax income and the ending inventory amounts for the two cases. Pretax income Ending inventory Case A FIFO Comparison of Amounts Case B LIFO Difference
Transcribed Image Text:Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the difference between the pretax income and the ending inventory amounts for the two cases. Pretax income Ending inventory Case A FIFO Comparison of Amounts Case B LIFO Difference
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