Reference no: EM132409119
Question
Information given:
1. The units of an item available for sale during the year were as follows:
01-Jan Inventory 21 units at $122
17-Feb Purchase 54 units at $128
21-Jul Purchase 63 units at $132
23-Nov Purchase 38 units at $155
There were 50 units of the items in the physical inventory at 31 December. Periodic inventory system is used.
Required: Determine the inventory cost using :
(a) FIFO
(b) LIFO
(c) The average cost methods.
A firm is assumed to use perpetual system which is separately determined inventory under FIFO and LIFO and then compare the results.
i) In each space below, place the correct sign (< / > / =) for each comparison by assuming periods of rising prices. a) FIFO supplies __________ LIFO supplies
b) FIFO cost of sales __________ LIFO cost of sales
c) FIFO net profit ___________ LIFO net profit
d) FIFO taxable income ________ LIFO taxable income
ii) Why the use of LIFO is more preferable by a management compared to FIFO in period of rising prices?