LIFO and FIFO Inventory Costing Methods Review Problem
Listed below is information from Rajan Company regarding the beginning inventory, purchases and sales of one item of inventory for the month of January.
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Jan. 1 Beginning Inventory
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6 units at $10 each
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Jan 8
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Sold 2 units for $30 each
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Jan. 13
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Purchased 10 units at $12 each
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Jan 20
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Sold 5 units at $30 each
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1. Fill in the chart below by computing cost of goods sold for January and the value of inventory reported on the Jan 31 balance sheet. Show the correct amounts for the FIFO and LIFO inventory methods. Be sure to show your calculations and final answer
2. Which inventory method would the business owner choose if his primarily objective was to minimize income taxes? State your choice and why?