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Problem 6-07A a-b The management of Lily Co. asks your help in determining the comparative...

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Accounting

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Problem 6-07A a-b The management of Lily 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 (13,000 units) Cost of 100,000 units purchased Selling price of 84,000 units sold Operating expenses $54,600 482,000 735,000 140,000 Units purchased consisted of 35,000 units at $4.60 on May 10; 35,000 units at $4.80 on August 15; and 30,000 units at $5.10 on November 20. Income taxes are 30%. Prepare comparative condensed income statements for 2020 under FIFO and LIFO LILY CO Condensed Income Statement FIFO LIFO LINK TO TEXT Answer the following questions for management. (1) Which inventory cost flow method produces the most meaningful inventory amount for the balance sheet? (2) Which inventory cost flow method produces the most meaningful net income? (3) Which inventory cost flow method is most likely to approximate actual physical flow of the goods? (4) How much additional cash will be available for management under LIFO than under FIFO? (5) How much of the gross profit under FIFO is illusory in comparison with the gross profit under LIFO

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