Reference no: EM132755299
The management of Waterway Inc. is reevaluating the appropriateness of using its present inventory cost flow method, which is average-cost. The company requests your help in determining the results of operations for 2020 if either the FIFO or the LIFO method had been used. For 2020, the accounting records show these data:
Inventories Purchases and Sales
Beginning (5,000 units) $20,000
Total net sales (181,000 units) $1,113,150
Ending (14,000 units)
Total cost of goods purchased (190,000 units) $846,000
Purchases were made quarterly as follows.
Quarter Units Unit Cost Total Cost
1 50,000 $4.20 $210,000
2 40,000 4.35 174,000
3 40,000 4.50 180,000
4 60,000 4.70 282,000
190,000 $846,000
Operating expenses were $125,000, and the company's income tax rate is 40%.
Problem 1: Prepare comparative condensed income statements for 2020 under FIFO and LIFO.
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