Lunar company uses a periodic inventory system. At the end of the annual accounting period, December 31, 2007, the accounting records provided the following information for Product 2:
Transactions Units Unit Cost
a. Inventory, December 31, 2006 3,000 $12
For the year 2007:
b. Purchase, April 11 9,000 10
c. Purchase, June 1 8,000 13
d. Sales ($40 each) 11,000
e. Operating expenses (excluding income tax expense), $195,000

Required:

1. Prepare a separate income statement through pretax income that details cost of goods sold for
1. Case A: FIFO.
2. Case B: LIFO.
2. For each case, show the computation of the ending inventory. Compare the pretax income and the ending inventory amounts between the two cases.

*****I have no idea how to do this or how to calculate the answers! ***********

THANKS!

FIFO is first in, first out. The cost of the first inventory purchased will also be the first cost to be used once an inventory is sold. LIFO, on the other hand, is Last In, First Out.

You can now solve your problem.:)