Question 4 25 pts (TCO 4) ABC company has the following record for inventory: On

Question

Question 4 25 pts (TCO 4) ABC company has the following record for inventory: On June 1, beginning inventory was 14 units$42, a purchase was made June 2 for 4 units @$69, a sale was made on June 7 for 7 units @ should the company report for ending inventory and cost of goods sold under the FIFO method and the LIFO method? (15 points) Which method would result in the lowest net income and tax if everything else is equal? How did you determine the method that would result in the lowest net income and tax? (10 points)

Explanation / Answer

Under the FIFO method, the amount of Inventory ending is(14+4-7-5) 6 units with a value of $360 total.

                   Cost of Goods Sold =$504.

Using the LIFO method inventory is(14+4-7-5) 6 units with a total value of $252.

                Cost Of Goods Sold = $612

The method that would result in the lowest net income and therefore net tax is LIFO.

     Being able to use the higher cost reduces profit

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