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Emily Company uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current ye accounting records provided the following information for product 2: Inventory, December 31, prior year For the current year: Purchase, April 11 Units Unit Cost 2,820 $ 14 9,000 15 7,910 20 10,870 Operating expenses (excluding income tax expense) $ 189,000 Purchase, June 1 Sales ($57 each) Required: 1. Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Cas LIFO. 2. Compute the difference between the pretax income and the ending inventory amount for the two cases. 3. Which inventory costing method may be preferred for income tax purposes?

Emily Company uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current ye accounting records provided the following information for product 2: Inventory, December 31, prior year For the current year: Purchase, April 11 Units Unit Cost 2,820 $ 14 9,000 15 7,910 20 10,870 Operating expenses (excluding income tax expense) $ 189,000 Purchase, June 1 Sales ($57 each) Required: 1. Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Cas LIFO. 2. Compute the difference between the pretax income and the ending inventory amount for the two cases. 3. Which inventory costing method may be preferred for income tax purposes?

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter7: Inventories: Cost Measurement And Flow Assumptions
Section: Chapter Questions
Problem 11RE: Jessie Stores uses the periodic system of calculating inventory. The following information is...
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Emily Company uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, accounting records provided the following information for product 2: Inventory, December 31, prior year For the current year: Purchase, April 11 Units 2,820 Unit Cost $ 14 9,000 15 7,910 20 Sales ($57 each) 10,870 Operating expenses (excluding income tax expense) $ 189,000 Purchase, June 1 ces 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 amount for the two cases. 3. Which inventory costing method may be preferred for income tax purposes?
Transcribed Image Text:Emily Company uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, accounting records provided the following information for product 2: Inventory, December 31, prior year For the current year: Purchase, April 11 Units 2,820 Unit Cost $ 14 9,000 15 7,910 20 Sales ($57 each) 10,870 Operating expenses (excluding income tax expense) $ 189,000 Purchase, June 1 ces 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 amount for the two cases. 3. Which inventory costing method may be preferred for income tax purposes?
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