The management of Kuiper Inc. asks your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods. For 2012, the accouting records show these data.
Inventory, January 1 (10,000 units) $35,000
Cost of 120,000 units purchased 468,500
Selling price of 98,000 units sold 750,000
Operating expenses 124,000
Units purchased consisted of 35,000 units at $3.70 on May 10; 60,000 units at $3.90 on August 15; and 25,000 units at $4.20 on November 20. Income taxes ar 28%
This is the template I have to use:
KUIPER, INC.
Condensed Income Statements
For the Year Ended December 31, 2012

FIFO LIFO
Sales
Cost of goods sold
Beginning inventory
Cost of goods purchased
Cost of goods available for sale
Less: Ending inventory
Cost of goods sold
Gross profit
Operating expenses
Income before income taxes
Income tax expense (28%)
Net income

Post your attempt please, and you will receive help from there.

I need to know if sales and cost of goods sold will be $750,000. That is where I am stuck.

Sales will definitely be $750,000. It is the ending inventory that will be different.

Cost of Goods sold will be for 98,000 units.

You will need to calculate the dollar amount for FIFO (First In First Out) method and LIFO (Last In First Out) method, because these methods will have different dollar amounts for Cost of Goods Sold and Ending Inventory.

This is what I have for the FIFO Side. Need to know if I'm on the right track. Thanks.



KUIPER, INC.
Condensed Income Statements
For the Year Ended December 31, 2012

FIFO LIFO
Sales $750,000
Cost of goods sold
Beginning inventory 35,000
Cost of goods purchased 468,500
Cost of goods available for sale 503,500
Less: Ending inventory 19,500
Cost of goods sold 484,000
Gross profit 266,000
Operating expenses 124,000
Income before income taxes 142,000
Income tax expense (28%) 39,760
Net income 102,240

KUIPER, INC.
Condensed Income Statements
For the Year Ended December 31, 2012

FIFO LIFO
Sales $750,000 $750,000
Cost of goods sold
Beginning inventory 35,000 35,000
Cost of goods purchased 468,500 468,500
Cost of goods available for sale 503,500 503,500
Less: Ending inventory 19,500 21,000
Cost of goods sold 484,000 482,500
Gross profit 266,000 267,500
Operating expenses 124,000 124,000
Income before income taxes 142,000 143,500
Income tax expense (28%) 39,760 40,180
Net income 102,240 103,320

Quote:

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Originally Posted by Stephaniedtodd

KUIPER, INC.
Condensed Income Statements
For the Year Ended December 31, 2012

Code:

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                                  FIFO($)        LIFO($)
Sales                                  750,000        750,000
Beginning inventory                  35,000          35,000
Cost of goods purchased                  468,500        468,500
Cost of goods available for sale  503,500        503,500
Less: Ending inventory            19,500          21,000
Cost of goods sold                484,000        482,500
Gross profit                          266,000        267,500
Operating expenses                  124,000        124,000
Income before income taxes          142,000        143,500
Income tax expense (28%)          39,760          40,180
Net income                          102,240        103,320

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I'm not getting the same ending inventory as you for FIFO and LIFO. Could you post what you did to get those?

And of course, the cost of goods sold and gross profit depend on them if you used the ending inventory.

Or if you counted them one by one and worked out the cost of goods sold independently of the ending inventory, you will see that you get values not totalling the total value of goods.