Decision Cases

LO $2$ C$6-85.($Learning Objective $2$: Apply and compare various inventory methods, and

assess the impact of a year$-$end purchase of inventony$)$ Jasper Corporation is nearing

the end of its first year of operations. Jasper made inventory purchases of $$745,000$

during the year, as follows:

Sales for the year are $5,000$ units for $$1,200,000$ of revenue. Expenses other than

cost of goods sold and income taxes total $$200,000.$ The president of the company

is undecided about whether to adopt the FIFO method or the LIFO method for

inventories. The company's income tax rate is $40\%.$

Requirements

Prepare income statements for the company under FIFO and under LIFO.

Compare the net income under FIFO with the net income under LIFO. Which

method produces the higher net income? What causes this difference? Be

specific.