The Brachman Company is starting in business on December 31, 20X0. In each half year, from 20X1 through 20X3, it expects to purchase 1,000 units and sell 500 units for the amounts listed below. In 20X4 it expects to purchase and sell 500 units in each half year. In 20X5, it expects to purchase no units and sell all remaining units for the amount indicated in the following table:

Assume that there are no costs or expenses other than those shown above. The tax rate is 40%, and taxes for each year are payable on December 31 of each year. Brachman Company is trying to decide whether to use periodic FIFO or LIFO throughout the 5-year period.
1. What was net income under FIFO for each of the 5 years? Under LIFO? Show calculations.
2. Explain briefly which method, LIFO or FIFO, seems more advantageous, andwhy.

  • CreatedFebruary 20, 2015
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