Question

Required information [The following information applies to the questions displayed below.) Givoly Inc. 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 $13 6,300 Inventory, December 31, prior year For the current year: Purchase, March 5 Purchase, September 19 Sale ($30 each) Sale ($32 each) Operating expenses (excluding income tax expense) 11 7 18,300 9,300 8,500 15,300 $393,000 2. Compute the difference between the pretax income and the ending inventory amounts for the two cases. Case A FIFO Comparison of Amounts Case B LIFO Difference Pretax income Ending inventory

Answer 1

Income statement

	Case A		Case B
	FIFO		LIFO
Sales (8500*30+15300*32)		744600		744600
Cost of goods sold
Beginning inventory (6300*13)	81900		81900
Purchase	266400		266400
Cost of goods available for sale	348300		348300
Less: Ending inventory	73900		123700
Cost of goods sold		274400		224600
Gross profit		470200		520000
Operating expense		393000		393000
Pretax income (loss)		77200		127000

	Comparison of accounts
	FIFO	LIFO	Difference
Pretax income	77200	127000	49800
Ending inventory	73900	123700	49800