Pacific Company sells electronic test equipment that it acquires from a foreign source. During the year
2014, 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):

2. The management, for various reasons, is considering buying 20 additional units before December 31, 2014, at $9,000 each. Restate the income statement (and ending inventory), assuming that this purchase is made on December 31, 2014.
3. How much did pretax income change because of the decision on December 31, 2014? Assuming that the unit cost of test equipment is expected to continue to decline in 2015, is there any evidence of income manipulation?Explain.

Transcribed Image Text:

Beginning inventory Purchases Sales (47 units at $24,500 each) Units Unit Cost Total Cost S240,000 420,000 20 42 S12,000 10,000 Sales revenue Cost of goods sold Gross profit Expenses Pretax income Ending inventory 300,000