Question

Assume that a firm separately determined inventory under FIFO and LIFO and then compared the results. In each space below, place the correct sign; less than (<), greater than (>), or equal (=) for each comparison, assuming periods of rising prices.

1. FIFO inventory vs LIFO inventory
2. FIFO cost of goods sold vs LIFO cost of goods sold
3. FIFO net income vs LIFO net income
4. FIFO income taxes vs LIFO income taxes

Answer 1

Answer:

1. FIFO inventory greater than (>)  LIFO inventory  

2. FIFO cost of goods sold less than (<) LIFO cost of goods sold

3. FIFO net income greater than (>)  LIFO net income

4. FIFO income taxes greater than (>) LIFO income taxes

Explanation:

• FIFO  assigns the lowest amount to cost of goods sold yielding the highest gross profit
• LIFO assigns the highest amount cost of goods sold yielding the lowest gross profit and net income, which also yields a temporary tax advantage by postponing payment of some income tax

For numerical understanding we

Use the following data

Working 1

Date                Explanation          Units             Unit Cost       Total Cost

Sept. 1                 Inventory              12                 $106               $ 1,272

Sept. 12                Purchases         45                   109                  4,905

Sept. 19                  Purchases        55                  110                    6,050

Sept. 26                   Purchases         21                111                    2,331

Totals                                                133                                       $14,558

Sales       105 Units  at $ 125= $ 13125

And after Calculation we get

FIFO ending inventory at 30 September  :  $3101

LIFO ending inventory at  30  September $3016

FIFO Cost OF Goods Sold    $ 11487            

LIFO Cost OF Goods Sold    $ 11572