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Chrome File Edit View History Bookmarks People Window Help G -' 29% D Tue 8:28 PM Ayah Mansour E k To Nature on C Chegg St e File Edit View H Secure https:newconnect.mheducation.com/flow/connect.html a t oogle 1 The Sociological NBA.com @ Home GradesFirst E ESPN: The World IRIT Online Main Home Chegg.com . Target * BenefitHub D Nike Women's Sp Netflix Blackboard take home chapter 5- 5-21 Help Save & Exit Submit Saved Check my work Required information The following ifarmation applies to the questions displayed below The following information pertains to the Inventory of Parvin Company Part 1 of 3 10 poits Tan. ining inventory Apr. 1Farchased 400 unit 17 2,500 units$22 L,000 unita23 During 2018, Parvin sold 3,315 units of inventory at $41 per unit and incurred $17,400 of operating expenses. Parvin currently uses the FIFO method but is consldering a change to LIFO. All transactions are cash transactions. Assume a 30 percent income tax rate. Parvin started the period with cesh of $127,200, inventory of$6,800, common stock of $110,000, and retained eamings of $24,000. Print a. Prepare Income statements using FIFO and LIFO. (Round Intermedlate calculations and final answers to the nearest whole dollar Income Statements For tho Year Endod Docomber 31, 2018 FIFO LIFO Income before tax Prev 123013Next > 20

Explanation / Answer

Parvin Company

Comparative income statements using FIFO and LIFO methods:

Parvin Company

Income Statements

For the year ended December 31, 2018

FIFO

LIFO

Sales

$135,915

$135,915

Less: Cost of goods sold:

Beginning inventory

$6,800

$6,800

Add: Purchases

$78,000

$78,000

$84,800

$84,800

Less: ending inventory

$13,455

$10,870

Cost of goods sold

$71,345

$73,930

Gross Profit

$64,570

$61,985

Less: Operating expenses

$17,400

$17,400

Income before tax

$47,170

$44,585

Income tax at 30%

$14,151

$13,375

Income after tax

$33,019

$31,210

Sales – 3,315 units

Beginning inventory + Purchases = 400 + 2,500 + 1,000 = 3,900 units

Ending inventory units = 585 units

Since under FIFO we assume that all beginning inventory and earlier purchases are used up first, the sales include beginning inventory of 400 units + 2,500 units of purchases at $22 plus 415 units of last purchases at $23. Hence, ending inventory consists of 585 units of purchases at $23.

FIFO ending inventory valuation = 585 x $23 = $13,455

LIFO –

Since under LIFO we assume that sales consist of units from latest purchases, the sales of 3,315 units include recent purchases of 1,000 at $23 and 2,315 at $22. Hence, ending inventory consists of 185 units of $22 and 400 units (beginning inventory) of $17.

LIFO ending inventory valuation = (400 x $17) + (185 x $22) = $10,870

Parvin Company

Income Statements

For the year ended December 31, 2018

FIFO

LIFO

Sales

$135,915

$135,915

Less: Cost of goods sold:

Beginning inventory

$6,800

$6,800

Add: Purchases

$78,000

$78,000

$84,800

$84,800

Less: ending inventory

$13,455

$10,870

Cost of goods sold

$71,345

$73,930

Gross Profit

$64,570

$61,985

Less: Operating expenses

$17,400

$17,400

Income before tax

$47,170

$44,585

Income tax at 30%

$14,151

$13,375

Income after tax

$33,019

$31,210

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