Reference no: EM132574924

The following data are available for x company for the fiscal year ended on January 31, 20X1:

Sales 1600

Beginning Inventory 500 $4.00

Purchases, in chronological order 650 $5.00 850 $6.00 450 $8.00

Required:

Question a. Calculate cost of goods sold and ending inventory under the following cost-flow assumptions (using a periodic inventory system):

1. FIFO.

2. LIFO.

Round the unit cost answer to two decimal places and ending inventory to the nearest $10.

Question b. Assume that the sales price of the units is $15/unit and operating expenses are $9,500 (ignore income taxes). Needs income statement that shows 20X1 amounts for the FIFO method in one column, the LIFO method in another column, also include the following line items in the income statement: Sales, Cost of Goods Sold, Gross Profit, Operating Expenses, and Income from Operations.

Question c. Compare the Income from Operations and the ending inventory amounts that would be reported under the two methods. Explain the similarities and differences.

Question d. Which inventory costing method may be preferred by x company for income tax purposes? Explain.