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    Merrimack Tractors and Mowers, Inc.: Lifo or Fifo ?: Assumptions Preparing Income Statement

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    Dinman Gupta
    This document compares the LIFO and FIFO inventory methods for Merrimack Tractors and Mowers for the year 2008. Using LIFO, the cost of goods sold is $62 million resulting in a net income of $1.1 million. Using FIFO, the cost of goods sold is $50.5 million resulting in a higher net income of $8.58 million. It concludes that the company should use the FIFO method since it results in greater profits.

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    Merrimack Tractors and Mowers, Inc.: Lifo or Fifo ?: Assumptions Preparing Income Statement

    Uploaded by

    Dinman Gupta
    639 views3 pages
    This document compares the LIFO and FIFO inventory methods for Merrimack Tractors and Mowers for the year 2008. Using LIFO, the cost of goods sold is $62 million resulting in a net income of $1.1 million. Using FIFO, the cost of goods sold is $50.5 million resulting in a higher net income of $8.58 million. It concludes that the company should use the FIFO method since it results in greater profits.

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    dinman_40013

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    This document compares the LIFO and FIFO inventory methods for Merrimack Tractors and Mowers for the year 2008. Using LIFO, the cost of goods sold is $62 million resulting in a net income of $1.1 million. Using FIFO, the cost of goods sold is $50.5 million resulting in a higher net income of $8.58 million. It concludes that the company should use the FIFO method since it results in greater profits.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    639 views3 pages

    Merrimack Tractors and Mowers, Inc.: Lifo or Fifo ?: Assumptions Preparing Income Statement

    Uploaded by

    Dinman Gupta
    This document compares the LIFO and FIFO inventory methods for Merrimack Tractors and Mowers for the year 2008. Using LIFO, the cost of goods sold is $62 million resulting in a net income of $1.1 million. Using FIFO, the cost of goods sold is $50.5 million resulting in a higher net income of $8.58 million. It concludes that the company should use the FIFO method since it results in greater profits.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLSX, PDF, TXT or read online from Scribd
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    MERRIMACK TRACTORS AND MOWERS, I

    CALCULATION OF BALANCE ANS SALESCALCULATION


    AS PER LIFO METHOD
    OF INVENTORY BALANCE
    PARTICULARS
    AVAILABLE SALES
    UNITS
    RATE
    AMOUNT
    BEGINNING
    15000
    900 13500000
    QUARTER 1
    10000
    1400 14000000
    QUARTER 2
    10000
    1500 15000000
    QUARTER 3
    10000
    1600 16000000
    QUARTER 4
    10000
    1700 17000000
    TOTAL
    55000
    75500000

    CALCULATION OF INVENTORY BALANCE


    PARTICULARS
    AVAILABLE SALES
    UNITS
    RATE
    AMOUNT
    BEGINNING
    15000
    900 13500000
    QUARTER 1
    10000
    1400 14000000
    QUARTER 2
    10000
    1500 15000000
    QUARTER 3
    10000
    1600 16000000
    QUARTER 4
    10000
    1700 17000000
    TOTAL
    55000
    75500000

    INCOME STATEMENT FOR THE YEAR (2008)


    ASSUMPTIONS PREPARING INCOM
    PARTICULARS
    LIFO
    FIFO
    SALES
    73700000
    73700000
    1 THERE IS A 10% INCREASE IN THE
    COGS
    62000000
    50500000
    2 SELLING AND DISTRIBUTION EXPEN
    GROSS MARGIN
    11700000
    23200000
    S & D EXPENCES
    10000000
    10000000
    INCOME BEFORE TAX
    1700000
    13200000 CONCLUSION:- THE COMPANY IS MAKING MORE PRO
    LESS -TAX (35%)
    595000
    4620000
    NET INCOME
    1105000
    8580000
    PROFIT MARGIN(%)
    1.5
    11.64

    S AND MOWERS, INC.: LIFO OR FIFO ?

    INVENTORY BALANCE ANS SALES AS PER LIFO METHOD (2008)


    ISSUE
    SALES
    BALANCE
    UNITS
    RATE
    AMOUNT
    UNITS
    RATE
    AMOUNT
    10000
    1700 17000000
    10000
    1600 16000000
    10000
    1500 15000000
    10000
    1400 14000000
    15000
    900 13500000
    40000
    62000000
    15000
    900 13500000

    F INVENTORY BALANCE ANS SALES AS PER FIFO METHOD(2008)


    SALES
    BALANCE
    UNITS
    RATE
    AMOUNT
    UNITS
    RATE
    AMOUNT
    15000
    900 13500000
    10000
    1400 14000000
    10000
    1500 15000000
    5000
    1600 8000000
    5000
    1600 8000000
    10000
    1700 17000000
    40000
    50500000
    15000
    3300 25000000

    ONS PREPARING INCOME STATEMENT

    A 10% INCREASE IN THE SALES PER YEAR


    ND DISTRIBUTION EXPENSES REMAINS THE SAME

    Y IS MAKING MORE PROFIT USING FIFO METHOD SO IT SHOULD OPT FOR THE FIFO METHOD OF INVENTORY EVALUATION.

    NTORY EVALUATION.

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