The Single-Step Income Statement for Clinton Company for 2010 Reported

question 64

Short Answer

The single-step income statement for Clinton Company for 2010 reported the following under two different assumptions $\begin{array}{lr} & \text { Case A FIFO } & \text { Case B LIFO } \\\text { Sales revenue } & \underline{(\$ 1,000,000)}&\underline{(\$ 1,000,000)}\\\text { Expenses: } & & \\\text { Cost of goods sold } & 600,000& 700,000 \\\text { Salary and wage expense } & 100,000&100,000 \\\text { Depreciation } & 20,000&20,000 \\\text { Other expenses } &80,000&80,000 \\\text { Total expenses } & 800,000 &900,000\\\text { Pretax income } & \$ 200,000 & \$ 100,000\\\\\text { Ending inventory for } 2010& \$ 120,000 & \$ ?\end{array}$ Answer the following questions (assume a 40% income tax rate):
A.Were merchandise inventory costs rising,or falling? Explain your answer.
B.What was the amount of the LIFO ending inventory?
C.Calculate net income (after tax)for both LIFO and FIFO.
D.Under FIFO,would retained earnings on the balance sheet be higher or lower than under LIFO?

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