LIFO and FIFO Corporation FACTS: Both companies begin operations by exchanging s

Question

LIFO and FIFO Corporation FACTS: Both companies begin operations by exchanging stock for $10,000 in cash and 300 widgets. The widgets had a value of S30,000 1. 2. Transactions - all on a cash basis Year One Year Two Sales Purchases $112,500 -b Expenses S. 50.000 $322,500-c $224,000 - d S 80,000 S 200,000- a a. 1000 units b. 900 units at a cost of $125/unit c. 1500 units d. 800 units S130 per unit, next 800 more units @ a cost of S150 per unit 3. Tax Rate-40% (assume taxes are paid on December 3 1st or the current year-not probable, but works for 113 REQUIRED: Prepare income statements for both companies for year one and year two, also do a balance sheet as of the end of year two

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Income Statement year 1 year 2 Sale 200000 322500 Less: Cost of Goods sold (Based on FIFO) 300*100 30000 700*125 87500 200*125 25000 800*130 104000 500*150 75000 Gross Margin 82500 118500 Less Operating Expense 50000 80000 Operating Income 32500 38500 Less: Income Tax 13000 15400 Net Income 19500 23100 Balance Sheet Common Stock 40000 Inventory 300*150 (based on FIFO) 45000 Cash 37600 (10000+200000+322500-112500-224000-50000-80000-13000-15400)

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