A company uses pero ic ventory sysem. The company he begnning mentory o 3 units

Question

A company uses pero ic ventory sysem. The company he begnning mentory o 3 units the cost $5 each. Dunng LIFO to cakulate cost of goods sole, then cost of goods sold will be e month 7 units were purc ased or $6 eech. The company so c 5 units dunng th month ur hed 5 remaining n ending mentory. lf e company uses FIFO instead o Ohighar uning FIFQ, leading to higher gross proft and highar incoma taxes O lawarusing FIFO, leading to highor grass profth and higher Inccma txes O lawerusing FIFO, lcading tower grass profit and lower Incone tancs O highor using FIFO, leading lowor grass profth and loer Incoma taxes

Explanation / Answer

when the cost of goods sold is calculated by FIFO instead of LIFO then the cost of goods sold will be lower using FIFO, leading to higher gross profit and higher income taxes.

Shown as below:

So correct answer is B.

Date Explanation Units Unit Cost Cost Opening Inventory 3 5.00 15 Purchased Inventory 17 6.00 102 Cost of goods available for sale 20 117 Cost of goods sold by FIFO 15 87 3 5 15 12 6 72 Cost of Goods sold by LIFO 15 6 90

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.