1. Beta Pharmaceuticals

Scenario: FIFO vs. LIFO Inventory Valuation

Data: Beta Pharmaceuticals uses both FIFO (First-In-First-Out) and LIFO (Last-In-First-Out) methods for inventory valuation. At the end of the fiscal year on December 31, 2023, the company reported the following inventory details:

• Beginning Inventory: 5,000 units at $8 per unit
• Purchases:
  • January 1: 10,000 units at $10 per unit
  • July 1: 7,000 units at $12 per unit

• Sales: 18,000 units during the year

Requirements: Calculate the Cost of Goods Sold (COGS) using both FIFO and LIFO methods for Beta Pharmaceuticals. Analyze how the choice of inventory valuation method impacts the company's reported COGS, gross profit, and taxable income. Discuss the financial statement implications of using FIFO versus LIFO during periods of rising and falling prices. Evaluate which inventory valuation method (FIFO or LIFO) Beta Pharmaceuticals should use, considering its financial reporting objectives and market conditions.