The management of Clare Co. asks your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods. For 2011, the accounting records show the following data.
Inventory, January 1 (10,000 units) $ 45,000
Cost of 100,000 units purchased 532,000
Selling price of 80,000 units sold 700,000
Operating expenses 140,000
Units purchased consisted of 35,000 units at $5.10 on May 10; 35,000 units at $5.30 on August 15;
and 30,000 units at $5.60 on November 20. Income taxes are 30%.
Instructions
(a) Prepare comparative condensed income statements for 2011 under FIFO and LIFO. (Show computations of ending inventory.)