A The management of Gresa Inc. is reevaluating the appropriateness of using its present inventory cost flow method, which is average-cost. The company requests your help in determining the results of operations for 2017 if either the FIFO or the LIFO method had been used. For 2017, the accounting records show these data: Inventories Purchases and Sales Beginning (5,000 units) $10,000 Total net sales (253,000 units) $1,176,450 Ending (22,000 units) Total cost of goods purchased (270,000 units) 698,000 Purchases were made quarterly as follows. Quarter Units Unit Cost Total Cost 1 70,000 $2.40 $168,000 2 60,000 2.50 150,000 3 60,000 2.60 156,000 4 80,000 2.80 224,000 270,000 $698,000 Operating expenses were $150,000, and the company’s income tax rate is 30%. Prepare comparative condensed income statements for 2017 under FIFO and LIFO.

FIFO and LIFO accounting are inventory management and financial accounting procedures that involve the amount of money a corporation must have locked up in the inventory of manufactured items, raw materials, parts, components, or feedstocks.

Comparative Condensed Income Statements for 2017  under FIFO and LIFO is as follow:

For more information about FIFO and LIFO refer to the link:

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Gresa Inc.

Comparative Condensed Income Statements for 2017

under FIFO and LIFO.

                                                                   FIFO                               LIFO

Sales                                                          1176450                    1176450

Cost Of Goods Sold                                 660,400                    657, 200

Gross Profit                                               516050                    539,500

Operating  Expense                                  $ 150,000               $ 150,000

Income before Tax                                      $ 366,050             $ 389500

Income Tax  (30%)                                       $ 109815                  $ 116850

Net Income                                                     $  256235  $272650

Working :

Fifo Cost of Goods Sold= $ 10,000 +  $168,000 +  $ 150,000+ 156,000 + 176,400=

Lifo Cost of Goods Sold= $ 224,000 + 156,000+  $ 150,000+127,200

Purchases were made quarterly as follows.

Quarter     Units         Unit Cost        Total Cost

1               70,000       $2.40             $168,000

2             60,000        2.50               150,000

3             60,000         2.60              156,000

4             80,000          2.80               224,000

                270,000                            $698,000

Inventories    Beginning (5,000 units)    $10,000          

Total net sales (253,000 units)  $1,176,450

Ending (22,000 units)

Total cost of goods purchased (270,000 units) 698,000

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