Q1. Assume 60 units were sold. Using FIFO and LIFO, calculate the cost allocated to cost of goods sold (COGS) and ending inventory in the space provided below.

Q2. Examine the results above. In a period of inflation:
a. (FIFO / _________) reports the greatest amount for COGS (Cost of goods sold).
b. (_________ / LIFO) allocates the higher, more recent costs to the balance sheet.
c. Which 60 units were really sold?
Q3. Assume the 60 units in Q1 sold for $100 each and operating expenses total $3,500. Using FIFO and LIFO, complete the income statement in the space provided below.

Q4. Examine the income statement above. In a period of inflation:
a. FIFO allocates the (recent / _________) inventory costs to COGS, which results in (_________ / higher) COGS and, therefore, (lower / _________) operating income.
b. LIFO allocates the (_________/ older) inventory costs to COGS, which results in (lower / _________) COGS and, therefore, (_________/ higher) operating income.
c. (FIFO / _________) results in less income tax expense.
Q5 International Financial Reporting Standards allow (_________/ LIFO), but do not allow (FIFO / _________).

Transcribed Image Text:

FIFO LIFO COGS ENDING INVENTORY INCOME STATEMENT -Sell 60 units for $100 each FIFO LIFO Sales revenue COGS Gross profit Operating expenses Operating income 3,500 3,500