Exercise: 26) Carbondale Company had the following data available for the last s

Question

Exercise: 26) Carbondale Company had the following data available for the last six months: Beg, inventory Purchase, 3/1 Sale, 4/1 Purchase, 5/1 Sale, 6/1 10.units $55 per unit 30 units 25 units$100 per unit 25 units 20 units $100 per unit $60 per unit $65 per unit Operating expenses are $2.000 per month. The income tax rate is 30%. Required: 1. Compute Cost of Goods Sold for the six months ending June 30 using a. FIFO perpetual b. LIFO perpetual 2. How much will the company save in income taxes if they use LIFO instead of FIFO?

Explanation / Answer

FiFO Method Closing Date Description Quantity Unit Cost or Value Quantity Unit Cost or Inventory Cost of Sales Profit Selling Price Selling Price March 1 Beginning inventory      10.00      55.00       550.00      10.00      55.00       550.00 March 3 Purchase      30.00      60.00    1,800.00      40.00      58.75    2,350.00 April 1 Sale      25.00     100.00    2,500.00      15.00      60.00       900.00      1,450.00    1,050.00 May 1 Purchase      25.00      65.00    1,625.00      40.00      63.13    2,525.00 June 1 Sale      20.00     100.00    2,000.00      20.00      65.00    1,300.00      1,225.00       775.00    1,300.00      2,675.00    1,825.00 LIFO Method Closing Date Description Quantity Unit Cost or Value Quantity Unit Cost or Inventory Cost of Goods Sold Profit Selling Price Selling Price March 1 Beginning inventory           10      55.00       550.00           10      55.00           550 March 3 Purchase      30.00      60.00    1,800.00           40      58.75        2,350 April 1 Sale      25.00     100.00    2,500.00           15      56.67           850      1,500.00    1,000.00 May 1 Purchase      25.00      65.00    1,625.00           40      61.88        2,475           40      60.88        2,435 June 1 Sale      20.00     100.00    2,000.00           20      58.75        1,175      1,260.00       740.00           20           59        1,175      2,760.00    1,740.00 LIFO FIFO Saving if company adopt LIFO Gross Profit           1,740              1,825 Operating Exp           2,000              2,000 Loss Before Tax             -260                -175 Tax Saving                -78                  -53                 26

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