Question

The board of directors of Nash Corporation is considering whether or not it should instruct the accounting department to shift from a first in, first out (FIFO) basis of pricing inventories to a last-in, first-out (LIFO) basis. The following information is available Sales Inventory, January 1 Purchases 21,800 units @ $51 6,200 units @ 20 6,200 units @ 22 10,300 units @ 26 6,800 units @ 31 7 .700 units @ ? $204,000 Inventory, December 31 Operating expenses Prepare a condensed income statement for the year on both bases for comparative purposes. Nash Corporation Condensed Income Statement For the year ended December 31 First-in, first-out Last-in, first-out Sales Revenue Cost of Goods Sold Inventory, Jan. 1 9:08 AM 1/23/2020 Purchases - 01 @ 7

how can I solve these two questions?

Answer 1

FIRST-IN, FIRST OUT METHOD Ending Inventory Units Total Jan 1 Beginning Balance Purchase Purchase Purchase Cost of Goods Available Less: Ending Inventory Cost of Goods Sold Cost of Goods Sold Units Total 6,200 $ 124,000.00 6,200 $ 136,400.00 9,400 $ 244,400.00 Units 6,200 $ 6,200 $ 10,300 $ 6,800 $ 29,500 7,700 21,800 Cost 20.00 22.00 26.00 31.00 Total $ 124,000.00 $ 136,400.00 $ 267,800.00 $ 210,800.00 $ 739,000.00 900 6,800 $ 23,400.00 $ 210,800.00 7,700 $ 234,200.00 21,800 $504,800.00 LAST-IN, FIRST OUT METHOD Cost of Goods Sold Units Total Ending Inventory Units Total 6,200 $ 124,000.00 1,500 $ 33,000.00 Jan 1 Beginning Balance Purchase Purchase Purchase Cost of Goods Available Less: Ending Inventory Cost of Goods Sold Cost 20.00 22.00 26.00 31.00 Units 6,200 $ 6,200 $ 10,300 $ 6,800 $ 29,500 7,700 21,800 Total $ 124,000.00 $ 136,400.00 $ 267,800.00 $ 210,800.00 $ 739,000.00 4,700 $ 103,400.00 10,300 $ 267,800.00 6,800 $ 210,800.00 7,700 $ 157,000.00 21,800 $ 582,000.00

FIFO: Under this method of inventory valuation, the oldest purchased inventory items are recorded as sold first in the books of accounts. That is, the ending inventory will always reflect the most recent purchase cost.

LIFO: Under this method of inventory valuation, the latest purchased inventory items are recorded as sold first in the books of accounts. That is, the ending inventory will be valued at the earliest purchase cost.

Nash Corporation Condensed Income Statement For the year ended December 31 First in, first out $ 1,111,800 lat Last in, first out $ 1,111,800 Sales revenue Cost of goods sold Inventory, Jan 1 Purchases Cost of goods available Inventory, Dec 31 Cost of goods sold Gross profit Operating expenses Net income/(loss) $ 124,000 $615,000 $ 739,000 $ 234,200 $ 124,000 $615,000 $ 739,000 $ 157,000 d=b+C f=d-e $504,800 $ 607,000 $ 204,000 $ 403,000 $ 582,000 $ 529,800 $ 204,000 $ 325,800 g-h

• Sales = 21,800 units × $51 = $1,111,800
• Purchases:
• 
  Units Price Total 6200 $ 22$ 136,400 10300 $ 26 $ 267,800 6800 $ 31 $ 210,800 TOTAL $ 615,000