Inventory method in more cash for omaha fertilizer company

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Question: LIFO and FIFO; Prices Rising and Falling Study. The Omaha Fertilizer Company had inventory on December 31, 20X0, of 20,000 bags at $10 = $200,000. Purchases during 20X1 were 30,000 bags. Sales were 28,000 bags for sales revenue of $17 per bag. Prepare a four-column comparative statement of gross margin for 20X1:

1. Assume that purchases were at $12 per unit. Assume FIFO and then LIFO (columns 1 and 2).

2. Assume that purchases were at $8 per unit. Assume FIFO and LIFO (columns 3 and 4).

3. Assume Omaha Fertilizer is reporting for tax purposes and has an income tax rate of 35%. Suppose all transactions are for cash.

a. Which inventory method in number 1 results in more cash for Omaha Fertilizer Company? By how much?

Reference no: EM131822428

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