Case 1. Duracraft Corporation is nearing the end of its first year of operations. Duracraft made inventory purchases of $745,000 during the year, as follows:
Sales for the year are 5,000 units for $1,200,000 of revenue. Expenses other than cost of goods sold and income taxes total $200,000. The president of the company is undecided about whether to adopt the FIFO method or the LIFO method for inventories. The income tax rate is 40%.
Case 2. The inventory costing method a company chooses can affect the financial statements and thus the decisions of the people who use those statements.
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