Peterson Products sells specialized mountaineering equipment that it acquires from an outside source. During the year 2011, the inventory records reflected the following:

Inventory is valued at cost using the LIFO inventory method.

Required:
1. Complete the following income statement summary using the LIFO method and the periodic inventory system (show computations):
Sales revenue ...... $_______
Cost of goods sold .... ________
Gross profit ........ ________
Expenses ......... 400,000
Pretax income ........ $_______
Ending inventory ..... $_______
2. The management, for various reasons, is considering buying 20 additional units before December 31, 2011, at $8,600 each. Restate the income statement (and Ending inventory), assuming that this purchase is made on December 31, 2011.
3. How much did pretax income change because of the decision on December 31, 2011? Assuming that the unit cost of equipment is expected to continue to decline in 2012, is there any evidence of income manipulation?Explain.

Transcribed Image Text:

Units Unit Cost Total Cost Beginning inventory Purchases Sales (50 units at $24,700 each) 16 12.500 $200,000 10.100 454,500 45