Question

The following data was obtained from the records of Brankovich Tool and Die, Inc., for the current year:

Jan. 1	Beginning Inventory	110 units at $10
February 1	Purchase	200 units at $12
April 1	Purchase	100 units at $14
July 1	Purchase	80 units at $16

The company sold 200 units during the year. Sales for the year are $70,000; operating expenses are $20,000; and the tax rate is 40%.

Required:

Using the multistep format, prepare the income statement using:

1. FIFO

2. LIFO

3. Average cost (Round all calculations to two decimal places.)

  

Answer 1

Using the multistep format, prepare the income statement using:

	FIFO	LIFO	Average cost
Sales	70000	70000	70000
Less:Cost of goods sold	(2180)	(2920)	(2522)
Gross profit	67820	67080	67478
Less: Operating expenses	(20000)	(20000)	(20000)
Income before tax	47820	47080	47478
Less: Income tax	(19128)	(18832)	(18991)
Net income	28692	28248	28487

Cost of goods sold = (110*10+200*12+100*14+80*16)/(110+200+100+80) = 12.61 per unit