Chapter 7, Problem 7.4CP

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:

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.