Question: Forever Products Inc sold 120 000 cases of glue at 20

Forever Products, Inc., sold 120,000 cases of glue at $20 per case during 2011. Its beginning inventory consisted of 20,000 cases at a cost of $12 per case. During 2011, it purchased 60,000 cases at $14 per case and 50,000 cases at $15 per case. Operating expenses were $550,000, and the applicable income tax rate was 30 percent.
Using the periodic inventory system, compute net income using the FIFO and LIFO methods for costing inventory. Which method produces the larger cash flow?
The company is considering a purchase of 10,000 cases at $15 per case just before the end of 2011. What effect on net income and on cash flow will this proposed purchase have under each method?

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  • CreatedSeptember 10, 2014
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