Question

Problem 6-4A The management of Indigo Corporation asks your help in determining the comparative effects of the FIFO and UFO inventory cost Inventory, January 1 (9,060 units) $ 31,710 Cost of 113,780 units purchased 440483 Selling price of 97.160 units old 686,100 Operating expenses 122,180 hos For 2017, the account record e d Units purchased consisted of 37,370 $3.70 on May 10, 62,360 nit o n August 15 and 14,050 420 () Prepare comparative condensed income statements for 2017 under FIFO and UFO. (Round answers to decimal places, November 20. Income taxes are 125.) Indigo Corporation Condensed Income Statements FIPO LIPO

Answer 1

Indigo Corporation

Condensed Income Statements

For the Year Ended December 31, 2017

   FIFO($) LIFO($)

1.Sales 686,100 686,100

Less:- Cost of Goods Sold

(a) Beginning Inventory    31,710   31,710

(b)Cost of goods purchased 440,483 440,483

2.Cost of Goods available for sale(a+b)   472,193 472,193

Less:- Ending Inventory [NOTE] 104,367 93,204

3. Cost of goods sold 367,826 378,989

4. Gross Profit [ 1 - 3 ] 318,274 307,111

Less:- Operating Expenses 122,180 122,180

5. Income before Income Taxes     196,094 184,931

Less:- Income Taxes ( 27%) 52,945 49,931

6. Net Income 143,149 135,000

NOTE:-Calculation of Ending Inventory:-

Ending Inventory units = 9060+113,780 - 97,160 = 25,680 units

FIFO

Ending inventory = (14,050 * $4.2) + (11,630 * $3.9) = $59,010 + $45,357 = $104,367

LIFO

Ending inventory = (9,060 * $3.5) + (16,620 * $3.7) = $31,710 + $61,494 = $93,204