Question

[The following information applies to the questions displayed below.) Broadhead 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 2,860 Unit Cost $ 14 12 Inventory, December 31, prior year For the current year: Purchase, April 11 Purchase, June 1 Sales ($51 each) Operating expenses (excluding income tax expense) 8,870 7,980 10,830 $186,500 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. BROADHEAD COMPANY Income Statement For the Year Ended December 31, current year Case A FIFO Case B LIFO Cost of goods sold: Goods available for sale Cost of goods sold

Answer 1

	Broadhead Company
	Income Statement
	For the year ended December 31, Current year
		Case A		Case B
		FIFO		LIFO
	Sales Revenue (10830 X $51)		$ 5,52,330		$ 5,52,330
Less:	Cost of goods sold
	Beginning Inventory	$     40,040		$     40,040
	Purchases	$ 2,42,100		$ 2,42,100
	Goods available for sale	$ 2,82,140		$ 2,82,140
Less:	Ending Inventory	$ 1,46,460		$ 1,12,280
	Cost of goods sold		$ 1,35,680		$ 1,69,860
	Gross profit		$ 4,16,650		$ 3,82,470
Less:	Operating expenses		$ 1,86,500		$ 1,86,500
	Net Income		$ 2,30,150		$ 1,95,970
	Workings:
	FIFO	Cost of goods available for sale			Cost of goods sold - Periodic FIFO			Ending Inventory - Periodic FIFO
	Beginning Inventory	2,860	$             14	$     40,040	2,860	$          14	$      40,040	-	$     14	$              -
	Purchases:
	Apr-11	8,870	$             12	$ 1,06,440	7,970	$          12	$      95,640	900	$     12	$     10,800
	Jun-01	7,980	$             17	$ 1,35,660	-	$          17	$                -	7,980	$     17	$ 1,35,660
		19,710		$ 2,82,140	10,830		$   1,35,680	8,880		$ 1,46,460
	LIFO	Cost of goods available for sale			Cost of goods sold - Periodic LIFO			Ending Inventory - Periodic LIFO
	Beginning Inventory	2,860	$             14	$     40,040	-	$          14	$                -	2,860	$     14	$     40,040
	Purchases:
	Apr-11	8,870	$             12	$ 1,06,440	2,850	$          12	$      34,200	6,020	$     12	$     72,240
	Jun-01	7,980	$             17	$ 1,35,660	7,980	$          17	$   1,35,660	-	$     17	$              -
		19,710		$ 2,82,140	10,830		$   1,69,860	8,880		$ 1,12,280