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Total cost of goods sold for june 5667 5079 10746 8

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Total Cost of Goods Sold for June = $5,667 + $5,079 = $10,746
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8-12 Financial Statement Summary – Perpetual Method FIFO LIFO Average Sales 23,300 $ 23,300 $ 23,300 $ Cost of goods sold 10,700 11,000 10,746 Gross profit 12,600 12,300 12,554 Operating expenses: Administrative 4,500 4,500 4,500 Selling 5,300 5,300 5,300 Total expenses 9,800 9,800 9,800 Income before taxes 2,800 2,500 2,754 Income tax expense 840 750 826 Net income 1,960 $ 1,750 $ 1,928 $ Ending Inventory 1,950 $ 1,650 $ 1,904 $ Notice that, when costs are increasing, gross profit, net income and income taxes are lowest under LIFO, highest under FIFO, and somewhere in the middle under average cost. Also, Ending Inventory is lowest under LIFO, highest under FIFO, and somewhere in the middle under average cost.
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8-13 When Prices Are Rising . . . LIFO Matches high (newer) costs with current (higher) sales. Inventory is valued based on low (older) cost basis. Results in lower pre- tax income . FIFO Matches low (older) costs with current (higher) sales. Inventory is valued at approximate replacement cost. Results in higher pre-tax income.
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8-14 U. S. GAAP vs. IFRS LIFO is permitted and used by U.S. Companies. If used for income tax reporting, the company must use LIFO for financial reporting. Does not permit the use of LIFO. Because of this restriction, many U.S. multinational companies use LIFO only for domestic inventories. LIFO is an important issue for U.S. multinational companies. Unless the U.S. Congress repeals the LIFO conformity rule, an inability to use LIFO under IFRS will impose a serious impediment to convergence.
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8-15 Many companies use LIFO for tax and external financial reporting purposes. FIFO or average cost for internal reporting purposes. Reasons: 1. Pricing decisions based on FIFO or average cost 2. Record keeping easier and less costly under FIFO or average cost 3. Profit-sharing or bonus arrangements based on FIFO or average cost LIFO Reserve
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8-16 LIFO Reserve is the difference between the inventory method used for internal reporting purposes and LIFO. The LIFO Reserve (or Allowance)
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Total Cost of Goods Sold for June 5667 5079 10746 8 12...

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