The management of Lily Co. asks your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods. For 2022, the accounting records show these data. Inventory, January 1 (10,000 units) Cost of 100,000 units purchased Selling price of 84,000 units sold Operating expenses $43,000 492,000 735,000 140,000 Units purchased consisted of 35,000 units at $4.70 on May 10, 35,000 units at $4.90 on August 15, and 30.000 units at $5.20 on November 20, Income taxes are 30%. (a) Prepare comparative condensed income statements for 2022 under FIFO and LIFO. LILY CO. Condensed Income Statement FIFO LIFO

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Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.