Answer:
National Inc.
Comparative condensed income statements for 2022
FIFO LIFO
Sales $750,000 750,000
Less Cost of Sales ($371,200) ($394,500)
Gross Profit $378,800 $355,500
Less Expenses
Operating expenses ($124,000) ($124,000)
Operating Profit $254,800 $231,500
Income tax expense ($71,344) ($64,820)
Net Income (Loss) $183,456 $166,680
Explanation:
FIFO
Assumes that the units to arrive first will be sold first. Therefore, the Cost of Goods Sold will be based on the earlier (old) prices.
Cost of Sales = 10,000 x $3.50 + 35,000 x $3.70 + 53,000 x $3.90 = $371,200
LIFO
Assumes that the units to arrive last will be sold first, Hence the Cost of Goods Sold will be based on the later (new) prices.
Cost of Sales = 25,000 x $4.20 + 60,000 x $3.90 + 15,000 x $3.70 = $394,500
