Question

ABC Company employs a periodic inventory system and sells its inventory to customers for $27 per unit. ABC Company had the following inventory information available for the month of May: May 1 May 8 May 13 May 18 Beginning inventory 2,400 units @ $14 cost per unit Sold 1,000 units Purchased 1,300 units @ $17 cost per unit Sold 1,200 units Purchased 1,100 units @ $11 cost per unit Sold 300 units Purchased 700 units @ $10 cost per unit May 28 May 30 During May, ABC Company reported operating expenses of $14,500 and had an income tax rate of 43%. Calculate the amount of net income shown on ABC Company's income statement for May using the LIFO method. Enter answer

Answer 1

$ 67,500 33,600 41,200 74,800 43,800 Sales Cost of Goods Sold: Beginning Inventory Add:Purchases Goods available for sale Less: Ending Inventory Cost of Goods Sold Gross Margin Operating Expenses Income before Tax Income Tax (43%) Net Income Less 31,000 36,500 14,500 22,000 9,460 12,540 $ Sales = (2500 units x $27) = 67500 Beginning Inventory = (2400 units x $14) = 33600 Purchases = (1300 units x $17) + (1100 units x $11) + (700 units x $10) = 41200 Ending Inventory units = Beginning + Purchase - Sold = 2400 + 3100 - 2500 = 3000 Ending Inventory cost = (2400 units x $14) + (600 units x $17) -43800 Income Tax = 22000 x 43% = 9460 Under LIFо method, Goods purchased last are supposed to be sold firs, so the ending inventory is from earlier purchased inventory. Here ending inventory is 3000 units, from this 2400 units are from beginning units and remaining 600 units are from purchase made on May 13.