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Givoly Incorporated uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided the following information for product 2: Inventory, December 31, prior year For the current year: Purchase, March 5 Purchase, September 19 Sale ($29 each) Sale ($31 each) Operating expenses (excluding income tax expense) $ 401,000 Units 7,100 19,100 10,100 8,100 16,100 Unit Cost $9 7 3 Required: 1. Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Case B: LIFO. 2. Compute the difference between the pretax income and the ending inventory amounts for the two cases. 3. Which inventory costing method may be preferred for income tax purposes?

Givoly Incorporated uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided the following information for product 2: Inventory, December 31, prior year For the current year: Purchase, March 5 Purchase, September 19 Sale ($29 each) Sale ($31 each) Operating expenses (excluding income tax expense) $ 401,000 Units 7,100 19,100 10,100 8,100 16,100 Unit Cost $9 7 3 Required: 1. Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Case B: LIFO. 2. Compute the difference between the pretax income and the ending inventory amounts for the two cases. 3. Which inventory costing method may be preferred for income tax purposes?

Financial Accounting
Financial Accounting
15th Edition
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Carl Warren, James M. Reeve, Jonathan Duchac
Chapter6: Accounting For Merchandising Businesses
Section: Chapter Questions
Problem 9PB: On June 30, 2019, the balances of the accounts appearing in the ledger of Simkins Company are as...
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Givoly Incorporated uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided the following information for product 2: Inventory, December 31, prior year For the current year: Purchase, March 5 Purchase, September 19 Sale ($29 each) Sale ($31 each) Operating expenses (excluding income tax expense) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required: 1. Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Case B: LIFO. 2. Compute the difference between the pretax income and the ending inventory amounts for the two cases. 3. Which inventory costing method may be preferred for income tax purposes? Required 3 Pretax income Ending inventory Case A FIFO $ 401,000 Comparison of Amounts Case B LIFO Compute the difference between the pretax income and the ending inventory amounts for the two cases. Difference Units 7,100 < Required 1 19, 100 10,100 8,100 16,100 Unit Cost $9 Required 3 > 7 3
Transcribed Image Text:Givoly Incorporated uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided the following information for product 2: Inventory, December 31, prior year For the current year: Purchase, March 5 Purchase, September 19 Sale ($29 each) Sale ($31 each) Operating expenses (excluding income tax expense) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required: 1. Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Case B: LIFO. 2. Compute the difference between the pretax income and the ending inventory amounts for the two cases. 3. Which inventory costing method may be preferred for income tax purposes? Required 3 Pretax income Ending inventory Case A FIFO $ 401,000 Comparison of Amounts Case B LIFO Compute the difference between the pretax income and the ending inventory amounts for the two cases. Difference Units 7,100 < Required 1 19, 100 10,100 8,100 16,100 Unit Cost $9 Required 3 > 7 3
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