Reference no: EM133188664

Question - Flocken & Farley Bags employs the perpetual inventory method for its custom-made fanny packs. It has provided the following inventory information for October:

Oct. 1 On hand, 40 units @ $20 each $800

Oct. 8 Purchased 200 units @ $21 each 4,200

Oct. 14 Sold 190 units @ $50 each 9,500

Oct. 19 Purchased 100 units @ $25 each 2,500

Oct. 28 Sold 120 units @ $50 each 6,000

Flocken & Farley Bags has a 40% effective income tax rate.

Required -

A. How much is the cost of ending inventory at October 31 and the cost of goods sold for October using FIFO?

B. How much is the cost of ending inventory at October 31 and the cost of goods sold for October using LIFO?

C. How much will Flocken & Farley Bags save in income taxes if it uses LIFO?

D. Calculate Flocken & Farley Bags' inventory-on-hand period under both LIFO and FIFO. Which method generates the 'better' inventory-on-hand' ratio?