Question

Required information (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: Units Unit Cost $ 14 2,840 Inventory, December 31, prior year For the current year: Purchase, April 11 Purchase, June 1 Sales ($53 each) Operating expenses (excluding income tax expense) 8,840 7,940 10,910 20 $188,000 2. Compute the difference between the pretax income and the ending inventory amount for the two cases. X Answer is not complete. Comparison of Amounts Case A Case B FIFO L IFO Difference 203,350 203,350 Pretax income Ending inventory $ $

Answer 1

• Requirement 2

	Case A	Case B
	FIFO	LIFO	Difference
Pretax Income [Working #1]	$                    229,420.00	$ 186,880.00	$       42,540.00
Ending Inventory [Working #2]	$                          170,350	$        127,810	$       42,540.00

• Working #1

	FIFO	LIFO
Sales Revenue	$ 578,230.00	$          578,230.00
(-) Cost of Goods Sold (as calculated above)	$ 160,810.00	$          203,350.00
Gross Margin	$ 417,420.00	$          374,880.00
(-) Operating Expenses	$ 188,000.00	$          188,000.00
Pretax Income	$ 229,420.00	$          186,880.00

• Working #2

FIFO	Cost of Goods available for sale			Cost of Goods Sold			Ending Inventory
	Units	Cost/unit	COG for sale	Units sold	Cost/unit	COGS	Units	Cost/unit	Ending inventory
Beginning Inventory	2840	$                14.00	$                      39,760.00	2840	$               14.00	$               39,760.00	0	$                 14.00	$                         -
Purchases:
11-Apr	8840	$                15.00	$                    132,600.00	8070	$               15.00	$            121,050.00	770	$                 15.00	$          11,550.00
01-Jun	7940	$                20.00	$                    158,800.00	0	$               20.00	$                              -	7940	$                 20.00	$        158,800.00
TOTAL	19620		$                    331,160.00	10910		$            160,810.00	8710		$        170,350.00
LIFO	Cost of Goods available for sale			Cost of Goods Sold			Ending Inventory
	Units	Cost/unit	COG for sale	Units sold	Cost/unit	COGS	Units	Cost/unit	Ending inventory
Beginning Inventory	2840	$                14.00	$                      39,760.00	0	$               14.00	$                              -	2840	$                 14.00	$          39,760.00
Purchases:
11-Apr	8840	$                15.00	$                    132,600.00	2970	$               15.00	$               44,550.00	5870	$                 15.00	$          88,050.00
01-Jun	7940	$                20.00	$                    158,800.00	7940	$               20.00	$            158,800.00	0	$                 20.00	$                         -
TOTAL	19620		$                    331,160.00	10910		$            203,350.00	8710		$        127,810.00