Beck Inc. uses a periodic inventory system. At the end of the annual accounting

Question

Beck Inc. uses a periodic inventory system. At the end of the annual accounting period, December 31, 2015, the accounting records provided the following information for product 2:

Prepare a separate income statement through pretax income that details cost of goods sold for (a) Case A: FIFO and (b) Case B: LIFO. (Loss amounts should be indicated with a minus sign.)

Compute the difference between the pretax income and the ending inventory amount for the two cases.

Pretax income=

Ending Inventory=

Units Unit Cost Inventory Dec 31, 2014 7300 $3 For the year 2015 Purchase, March 5 19,300 $7 Purchase, September 19 10,300 $9 Sale ($26 each) 8,300 Sale ($28 each) 16,300 Operating expenses (excluding income tax expense) = 503,000

Explanation / Answer

Beck Inc. All Amounts in $ 1. (a) Working of Cost of Goods Sold per FIFO Particulars Qty. Rate/unit Value Income Statement $ $ Sales 672200 Opening Inventory 7300 3 21900 Cost of Goods Sold 143000 Purchase on 05.03 19300 7 135100 Contribution Margin 529200 Sale prior to 19.09 -7300 3 -21900 Cost of Goods Sold Operating Expenses 503000 Sale prior to 19.09 -1000 7 -7000 Cost of Goods Sold Pre Tax Income 26200 Purchase on 19.09 10300 9 92700 Sale by 31.12 -16300 7 -114100 Cost of Goods Sold Closing Inventory 2000 7 14000 10300 9 92700 (b) Working of Cost of Goods Sold per LIFO Particulars Qty. Rate/unit Value Income Statement $ $ Sales 672200 Opening Inventory 7300 3 21900 Cost of Goods Sold 151000 Purchase on 05.03 19300 7 135100 Contribution Margin 521200 Sale prior to 19.09 -8300 7 -58100 Cost of Goods Sold Operating Expenses 503000 Sale prior to 19.09 -11000 7 -77000 Cost of Goods Sold Pre Tax Income 18200 Sale prior to 19.09 -5300 3 -15900 Cost of Goods Sold Purchase on 19.09 10300 9 92700 Closing Inventory 10300 9 92700 2000 3 6000 2. Variation between : Closing Inventory (FIFO v/s LIFO) 8000 Pre-tax Income (FIFO v/s LIFO) 8000

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