Pool Corporation, Incorporated, reported in its recent annual report that "In 2010, our industry experienced some price deflation… . . . In 2011, our industry experienced more normalized price inflation of approximately 2.6 percent overall despite price deflation for certain chemical products." This suggests that in some years Pool's overall inventory costs rise, and in some years they fall. Furthermore, in many years, the costs of some inventory items rise while others fall. Assume that Pool has only two product items in its inventory this year. Purchase and sales data are presented below. Inventory Item A Inventory Item B Transaction Units Beginning inventory 100 Purchases, February 7 140 Unit Cost $ 6.6 8.6 Units Unit Cost 100 140 Purchases, March 16 Sales, April 28 160 270 9.6 160 270 $ 6.6 5.6 3.6 Required: 1. Compute cost of goods sold for each of the two items separately using the FIFO and LIFO inventory costing methods. 2. Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow)? Complete this question by entering your answers in the tabs below.

Pool Corporation, Incorporated, reported in its recent annual report that "In 2010, our industry experienced some price deflation… . . . In 2011, our industry experienced more normalized price inflation of approximately 2.6 percent overall despite price deflation for certain chemical products." This suggests that in some years Pool's overall inventory costs rise, and in some years they fall. Furthermore, in many years, the costs of some inventory items rise while others fall. Assume that Pool has only two product items in its inventory this year. Purchase and sales data are presented below. Inventory Item A Inventory Item B Transaction Units Beginning inventory 100 Purchases, February 7 140 Unit Cost $ 6.6 8.6 Units Unit Cost 100 140 Purchases, March 16 Sales, April 28 160 270 9.6 160 270 $ 6.6 5.6 3.6 Required: 1. Compute cost of goods sold for each of the two items separately using the FIFO and LIFO inventory costing methods. 2. Between FIFO and LIFO, which method is preferable in terms of (a) net income and (b) income taxes paid (cash flow)? Complete this question by entering your answers in the tabs below.

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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