Determine net income under each approach

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Reference no: EM13531795

The following comparative information is available for Prasad Company for 2012.


LIFO

FIFO

Sales revenue

$86,000

$86,000

Cost of goods sold

38,000

29,000

Operating expenses



(including depreciation)

27,000

27,000

Depreciation

10,000

10,000

Cash paid for inventory purchases

32,000

32,000

Instructions

(a) Determine net income under each approach. Assume a 30% tax rate.

(b) Determine net cash provided by operating activities under each approach. Assume that all sales were on a cash basis and that income taxes and operating expenses, other than depreciation, were on a cash basis.

(c) Calculate the quality of earnings ratio under each approach and explain your findings.

Reference no: EM13531795

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