Reference no: EM132465060

The management of Crane Co. asks your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods. For 2020, the accounting records provide the following data.

Inventory, January 1 (11,000 units)              $47,300

Cost of 100,000 units purchased                  492,000

Selling price of 84,000 units sold                   735,000

Operating expenses                                   140,000

• Units purchased consisted of 35,000 units at $4.70 on May 10; 35,000 units at $4.90 on August 15; and 30,000 units at $5.20 on November 20. Income taxes are 30%.

Answer the following questions for management.

Question (1) Which inventory cost flow method produces the most meaningful inventory amount for the balance sheet?

Question (2) Which inventory cost flow method produces the most meaningful net income?

Question (3) Which inventory cost flow method is most likely to approximate actual physical flow of the goods?

Question (4) How much additional cash will be available for management under LIFO than under FIFO?

Question (5) How much of the gross profit under FIFO is illusory in comparison with the gross profit under LIFO?

Attachment:- LIFO.rar