Chapter 6, Problem 6.4AP

(a)

To determine

FIFO: In First-in-First-Out method, items purchased initially are sold first. So, the value of the ending inventory consists the recent cost for the remaining unsold items.

LIFO: In Last-in-First-Out method, items purchased recently are sold first. So, the value of the ending inventory consists the initial cost for the remaining unsold items.

Income statement: The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.

To prepare: The comparative condensed income statements for Incorporation T for the year ended 2014, under FIFO and LIFO.

(b)

To determine

To write: A letter to the management of Incorporation T, explaining the answers to the given questions.