Essay on Merrimack Tractors and Mowers, Inc: Lifo or Fifo ?

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Merrimack Tractors and Mowers, Inc.: LIFO or FIFO?
1.- Study the financial information for reel mower units that James Colburn prepared for Rick Martino. (Assume that the reel mower units are typical of all classes of inventory at Merrimack). Prepare a pro-forma income statement assuming no changes in accounting policy for 2008, and assuming the company sells 10,000 units each quarter at a price of 2,000 per unit with Sales General and Administration costs the same as for 2007.
Sales Quarter Units '000s Unit $ $ '000s 1 10 2,000 20,000 2 10 2,000 20,000 3 10 2,000 20,000 4 10 2,000 20,000 80,000 …show more content…
10,000 10,000 10,000 10,000
Income before taxes 11,000 8,000 12,000 14,000
Income before taxes % 16% 10% 15% 18%
Income Tax (35%) 3,850 2,800 4,200 4,900
Net Income 7,150 5,200 7,800 9,100
Net Income % 11% 7% 10% 11%

Realizando este método se generan mayores ingresos, ya que los costos de las mercaderías de las primeras compras es menor.

4. In the pro-forma income statements that James Colburn prepared for Rick Martino, the costs of reel mower units and transportations were rising for 2007 and 2008. How would Merrimack Mowers and its accounting choices have differed if inventory purchase prices and transportation costs had been stable or falling over the two-year period? (For example, if Merrimack were a computer assembly firm.)
Merrimaack antes controlaba sus ventas con los costos de sus ultimas compras, eso ha ocasionado un cambio en su
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