Question

2 Required information Part 1 of 3 [The following information applies to the questions displayed below.] Emily Company uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided the following information for product 2 10 points Unit Units Cost Skipped Inventory, December 31, prior year For the current year: Purchase, April 11 Purchase, June 1 Sales ($57 each) Operating expenses (excluding income tax expense) 2,990 $14 8,870 7,930 10,990 15 20 eBook $186,000 Hint Print Required: 1. Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Case B: LIFO. Reference EMILY COMPANY Income Statement For the Year Ended December 31, current year Case A Case B FIFO LIFO Cost of goods sold: Goods available for 0 0 sale Cost of goods sold

Answer 1

Emily Company Income Statement For the Year Ended December 31, Current Year Case A FIFO 626,430 Case B LIFO 626,430 Calculation Case A FIFO =10,990*57 Case B LIFO =10,990*57 =2,990*14 =8,870*15 =7,930*20 =2,990*14 =8,870*15 =7,930*20 Sales Cost of goods sold Inventory, December 31, prior year Purchase, April 11 Purchase, June 1 Goods available for sale Less: Inventory, December 31, current year Less: Inventory, December 31, current year Cost of goods sold Gross Profit Operating expenses (excluding income taxes) Operating Income 41,860 133,050 158,600 333,510 (158,600) (13,050) 41,860 133,050 158,600 333,510 (41,860) (87,150) =7,930*20 =2,990*14 = (8,800-7,930) *15 =(8,800-2,990) *15 161,860 464,570 186,000 278,570 204,500 421,930 186,000 235,930 Workings Inventory, December 31, current year Inventory, December 31, prior year Purchase, April 11 Purchase, June 1 Goods available for sale Less: Sales Inventory, December 31, current year Units 2,990 8,870 7,930 19,790 (10,990) 8,800 units Note In FIFO, ending inventory is latest purchase of 7,930 units @ $20 & rest from April 11 (8,800-7,930) units @ $15 In LIFO, ending inventory is oldest purchase of 2,990 units @ $14 & rest from April 11 (8,800-2,990) units @ $15