Chapter 6, Problem 6.4TIF

Communication

Golden Eagle Company began operations on April 1 by selling a single product. Data on purchases and sales for the year are as follows:

Purchases:

Date	Units Purchased	Unit Cost	Total Cost
April 6	31,000	$36.60	$1,134,600
May 18	33,000	39.00	1,287,000
June 6	40,000	39.60	1,584,000
July 10	40,000	42.00	1,680,000
August 10	27,200	42.75	1,162,800
October 25	12,800	43.50	556,800
November 4	8,000	44.85	358,800
December 10	8,000	48.00	384,000
	200,000		$8,148,000

Sales:

April	16,000 units
May	16,000
June	20,000
July	24,000
August	28,000
September	28,000
October	18,000
November	10,000
December	8,000
Total Units	168,000
Total sales	$10,000,000

The president of the company, Connie Kilmer, has asked for your advice on which inventory cost flow method should be used for the 32,000-unit physical inventory that was taken on December 31. The company plans to expand its product line in the future and uses the periodic inventory system.

Write a brief memo to Ms. Kilmer comparing and contrasting the LIFO and FIFO inventory cost flow methods and their potential impacts on the company’s financial statements.