Problem
The management of Gresa 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 2017 if either the FIFO or the LIFO method had been used. For 2017, the accounting records show these data:
Inventories Purchases and Sales
|
Inventories
|
Purchases and Sales
|
|
Beginning (7,000 units)
|
$14,000
|
Total net sales (180,000 units)
|
$747,000
|
|
Ending (17,000 units)
|
|
Total cost of goods purchased (190,000 units)
|
466,000
|
Purchases were made quarterly as follows.
|
Quarter
|
Units
|
Unit Cost
|
Total Cost
|
|
1
|
50,000
|
$2.20
|
$110,000
|
|
2
|
40,000
|
2.35
|
94,000
|
|
3
|
40,000
|
2.50
|
100,000
|
|
4
|
60,000
|
2.70
|
162,000
|
|
190,000
|
|
$466,000
|
Operating expenses were $130,000, and the company's income tax rate is 40%
Prepare comparative condensed income statements for 2017 under FIFO and LIFO.