Duracraft Corporation is nearing the end of its first
Question and Solution
Duracraft Corporation is nearing the end of its first year of operations. Duracraft made inventory purchases of $926,0
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Duracraft Corporation is nearing the end of its first year of operations. Duracraft made inventory purchases of $926,000 during the year, as follows: Sales for the year are 6,000 units for $1,800,000 of revenue. Expenses other than cost of goods sold and income taxes total $425,000. The president of the company is undecided about whether to adopt the FIFO method or the weighted-average-cost method for inventories. The company uses the periodic inventory system. The income tax rate is 30%. Requirements 1. To aid company decision making, prepare income statements under FIFO and under weighted-average cost. 2. Compare the net income under FIFO with net income under weighted-average cost. Which method produces the higher net income? What causes this difference? Be specific.
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