Answer:
Net income for Maltwo Co. is $132,300
Explanation:
FIFO
Sold 90,000 units
Cost of sold units =
opening 10,000 units for $3.7 = $37,000
purchased 40,000 units for $4.20 = $168,000
purchased 40,000 units for $4.4 = $176,000
Total cost of goods sold = $381,000
Sales = $720,000
less: cost of goods sold = $381,000
less: operating expenses = $150,000
Operating income = $189,000
less: Income tax 30% = $56,700
Net Income = $132,300
LIFO
Sold 90,000 units
Cost of sold units =
purchased 20,000 units for $4.55 = $91,000
purchased 50,000 units for $4.40 = $220,000
purchased 20,000 units for $4.20 = $84,000
Total cost of goods sold = $395,000
Sales = $720,000
less: cost of goods sold = $395,000
less: operating expenses = $150,000
Operating income = $175,000
less: Income tax 30% = $52,500
Net Income = $122,500
Most meaningful net income is calculated by FIFO because in most of the businesses goods purchased first are sold first and if not then the goods purchased the earliest cross its expiry date and eventually results in a loss for the company.
So the net income for Maltwo Co. is $132,300
