Givoly Incorporated 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: UnitsUnit CostInventory, December 31, prior year 7,800$ 10For the current year: Purchase, March 5 19,8008Purchase, September 19 10,8004Sale ($26 each) 8,800 Sale ($28 each) 16,800 Operating expenses (excluding income tax expense)$ 408,000 Required:Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Case B: LIFO.Compute the difference between the pretax income and the ending inventory amounts for the two cases.Which inventory costing method may be preferred for income tax purposes? **Chapter 7 Exercises****Operating expenses (excluding income tax expense):** $408,000**Required Tasks:**1. Prepare a separate income statement through pretax income that details the cost of goods sold for: - (a) Case A: FIFO - (b) Case B: LIFO2. 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?---**Instructions:**Complete this exercise by entering your answers in the tabs provided below.**Comparison of Amounts**| | Case A | Case B | Difference ||----------------------|--------|--------|--------------|| Inventory Costing Method | FIFO | LIFO | || Pretax Income | | | || Ending Inventory | | | |**Navigation:** - Use "Prev" or "Next" to navigate through the required sections.- Select "Required 1," "Required 2," or "Required 3" as needed to enter or review your responses.---This exercise guides users through understanding and comparing inventory costing methods, specifically First-In, First-Out (FIFO) and Last-In, First-Out (LIFO), for calculating pretax income and ending inventory values. It also asks students to consider the implications for income tax. **GIVOLY INCORPORATED: Income Statement Overview**The following is an income statement for Givoly Incorporated for the year ended December 31 of the current year. This statement provides a comparison between two inventory costing methods: FIFO (First-In, First-Out) denoted as Case A, and LIFO (Last-In, First-Out) denoted as Case B.### Case A: FIFO- **Sales Revenue**: $699,200- **Cost of Goods Sold Components**: - **Beginning Inventory**: Data not provided - **Purchases**: Data not provided - **Goods Available for Sale**: Amount not calculated - **Ending Inventory**: Data not provided - **Cost of Goods Sold**: Amount not calculated- **Gross Profit**: Amount not calculated- **Operating Expenses**: $408,000- **Pretax Income/Loss**: Amount not calculated### Case B: LIFO- The structure is identical to Case A, but specific data points (e.g., inventory figures) are not provided or calculated.**Instructions:** The statement requires preparation of a separate income statement through pretax income detailing the cost of goods sold for both FIFO and LIFO methods. It is noted that any loss amounts should be indicated with a minus sign.**Graph/Diagram Explanation:**There are no graphs or diagrams provided in this image. However, the data layout resembles a spreadsheet table used for accounting purposes to project financial outcomes under two different inventory costing methods. This comparison is crucial for understanding how inventory valuation affects financial statements and tax liabilities.

Name: Givoly Incorporated uses a periodic inventory system. At the end of th
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Description: Givoly Incorporated 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: UnitsUnit CostInventory, December 31, prior y

Inventory valuation refers to the process of assigning a monetary value to the inventory of a…

Answered: Givoly Incorporated uses a periodic…

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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		Units	Unit Cost
Inventory, December 31, prior year		7,800	$ 10
For the current year:
Purchase, March 5		19,800	8
Purchase, September 19		10,800	4
Sale ($26 each)		8,800
Sale ($28 each)		16,800
Operating expenses (excluding income tax expense)	$ 408,000

Required:

Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Case B: LIFO.
Compute the difference between the pretax income and the ending inventory amounts for the two cases.
Which inventory costing method may be preferred for income tax purposes?

**GIVOLY INCORPORATED: Income Statement Overview**

The following is an income statement for Givoly Incorporated for the year ended December 31 of the current year. This statement provides a comparison between two inventory costing methods: FIFO (First-In, First-Out) denoted as Case A, and LIFO (Last-In, First-Out) denoted as Case B.

### Case A: FIFO
- **Sales Revenue**: $699,200
- **Cost of Goods Sold Components**:
- **Beginning Inventory**: Data not provided
- **Purchases**: Data not provided
- **Goods Available for Sale**: Amount not calculated
- **Ending Inventory**: Data not provided
- **Cost of Goods Sold**: Amount not calculated
- **Gross Profit**: Amount not calculated
- **Operating Expenses**: $408,000
- **Pretax Income/Loss**: Amount not calculated

### Case B: LIFO
- The structure is identical to Case A, but specific data points (e.g., inventory figures) are not provided or calculated.

**Instructions:**
The statement requires preparation of a separate income statement through pretax income detailing the cost of goods sold for both FIFO and LIFO methods. It is noted that any loss amounts should be indicated with a minus sign.

**Graph/Diagram Explanation:**
There are no graphs or diagrams provided in this image. However, the data layout resembles a spreadsheet table used for accounting purposes to project financial outcomes under two different inventory costing methods. This comparison is crucial for understanding how inventory valuation affects financial statements and tax liabilities.

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