The management of Swifty Inc. is reevaluating the appropriateness of using its present inventory cost flow method, which is average-cost. The company requests your help in determining the results of operations for 2022 if either the FIFO or the LIFO method had been used. For 2022, the accounting records show these data:Inventories Purchases and SalesBeginning (8,000 units) $32,000 Total net sales (185,000 units) $1,137,750Ending (13,000 units) Total cost of goods purchased (190,000 units) 846,000Purchases were made quarterly as follows.Quarter Units Unit Cost Total Cost1 50,000 $4.20 $210,0002 40,000 4.35 174,0003 40,000 4.50 180,0004 60,000 4.70 282,000 190,000 $846,000Operating expenses were $130,000, and the company’s income tax rate is 40%. 1. Prepare comparative condensed income statements for 2022 under FIFO and LIFO.

Inventory Valuation Methods are methods of valuation of inventory. There are three methods of…

Answered: The management of Swifty Inc. is…

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter7: Inventories

Section: Chapter Questions

Problem 5PA

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The management of Swifty Inc. is reevaluating the appropriateness of using its present inventory cost flow method, which is average-cost. The company requests your help in determining the results of operations for 2022 if either the FIFO or the LIFO method had been used. For 2022, the accounting records show these data:

Inventories	Purchases and Sales
Beginning (8,000 units)	$32,000	Total net sales (185,000 units)	$1,137,750
Ending (13,000 units)		Total cost of goods purchased (190,000 units)	846,000

Purchases were made quarterly as follows.

Quarter	Units	Unit Cost	Total Cost
1	50,000	$4.20	$210,000
2	40,000	4.35	174,000
3	40,000	4.50	180,000
4	60,000	4.70	282,000
	190,000		$846,000

Operating expenses were $130,000, and the company’s income tax rate is 40%.

1. Prepare comparative condensed income statements for 2022 under FIFO and LIFO.

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