Effects of Inventory Costing Methods on Income
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Problem 7-36
Effects of Inventory Costing Methods on Income
Martin Merchandising has hired you to examine whether the company should use the LIFO or FIFO inventory costing method. The company uses a perpetual inventory system and
has supplied the following information for the month:
Required:
Prepare multi-step income statements under the LIFO and FIFO costing methods.
FIFO LIFO
Sales $808,500 $808,500
Cost of goods sold:
beginning inventory $80,000 $80,000
purchases $540,000 $540,000
goods available for sale $620,000 $620,000
less: ending inventory $157,500 $140,000
= cost of goods sold $462,500 $480,000
gross profit $346,000 $328,500
operating expenses $148,000 $148,000
income before taxes $198,000 $180,500
tax expense $69,300 $63,175
net income $128,700 $117,325.
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Solution Summary
Your tutorial is in Excel, attached, click in cells to see computations. The schedule shows you a multi-step income statements with all the proper subtotals.
Solution Preview
See the attached file.
FIFO LIFO
Sales $808,500 $808,500
Cost of goods sold:
beginning inventory $80,000 $80,000
purchases $540,000 $540,000 ...
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