Question: Big Apple Company's inventory records for year 2013-2014 are as follows:
|
Year 2013
|
Number of Units
|
Cost per Unit
|
Total Cost
|
|
Beginning Inventory
|
2,300
|
$2.60
|
$5,980
|
|
First purchase
|
3,100
|
2.75
|
8,525
|
|
Second purchase
|
3,600
|
2.85
|
10,260
|
|
Third purchase
|
2,900
|
2.95
|
8,555
|
|
Fourth purchase
|
2,400
|
3.1
|
7,440
|
|
Goods available for sale
|
14,300
|
|
$40,760
|
|
Units sold during the year
|
11,000
|
@5.50
|
|
|
Year 2014
|
Number of Units
|
Cost per Unit
|
Total Cost
|
|
Beginning Inventory
|
3,300
|
|
|
|
First purchase
|
2,600
|
3.1
|
8,060
|
|
Second purchase
|
3,100
|
3.1
|
9,610
|
|
Third purchase
|
2,400
|
3.25
|
7,800
|
|
Fourth purchase
|
1,900
|
3.45
|
6,555
|
|
Goods available for sale
|
13,300
|
|
|
|
Units sold during the year
|
12,000
|
@5.80
|
|
Required:
Q1. Compute the cost of ending inventory and cost of goods sold for 2013 and 2014, using the following inventory costing methods:
(1) FIFO
(2) LIFO
(3) Weighted Average
Q2. Assuming a corporate income tax rate is 40 percent and switching from FIFO to LIFO to reduce its income tax expense, calculate the tax savings or tax loss this would have made for the year of 2013 and 2014.
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