Respuesta :
Answer:
Explanation:
Fifo means first come first out
Under the fifo method we dispose oldest purchased units first.
Purchase
Date Units C.P.U Total
1-Jan 680 5 3400
12-Jan 650 7 4550
26-Jan 210 9 1890
Disposal Closing
Units C.P.U Total Units C.P.U Total
540 5 2700 140 5 700
650 7 4550
210 9 1890
We sold 540 units of first purchased from 1-Jan
140 5 700 590 7 4130
60 7 420 210 9 1890
We sold 140 units from first purchase 1-january and 60 units from 2nd purchase 12-january
under the fifo method profit is as follows
Sale proceeds = 15.8*540 8532
15.8*200 3160
11,692
Cost as given above
540*5 2700
140*5 700
60*7 420
Total Cost 3820
Profit ( Sale - Cost ) 7872
B) Lifo means last come first out
Under the lifo method we dispose earliest purchased units first.
Purchase
Date Units C.P.U Total
1-Jan 680 5 3400
12-Jan 650 7 4550
26-Jan 210 9 1890
Disposal Closing
Units C.P.U Total Units C.P.U Total
210 9 1890 680 5 3400
330 7 2310 320 7 2240
540 4200
We disposed off 26-january units 210 first and 12-january 330
Disposal Closing
Units C.P.U Total Units C.P.U Total
200 7 1400 680 5 3400
120 7 840
We disposed off 26-january units 200
Sale proceeds = 15.8*540 8532
15.8*200 3160
11,692
Cost as given above
210 9 1890
330 7 2310
200 7 1400
Total Cost 5600
Profit ( Sale - Cost ) 6092
Profit under Fifo 7882
Profit under Fifo 6092
there is positive correlation between tax and profit Higher the profit higher the tax will be paid, so under the lifo method profit is lower and the tax amount charged will be lower as compared to tax charged under fifo method.
