Question

HELP

Johnson Corporation began 2018 with inventory of 16,000 units of its only product. The units cost $8 each. The company uses a periodic Inventory system and the LIFO cost method. The following transactions occurred during 2018: a. Purchased 80,000 additional units at a cost of $12 per unit. Terms of the purchases were 2/10,n/30, and 100% of the purchases were paid for within the 10 day discount period. The company uses the gross method to record purchase discounts. The merchandise was purchased fo.b. shipping point and freight charges of $0.50 per unit were paid by Johnson b. 1,600 units purchased during the year were returned to suppliers for credit. Johnson was also given credit for the freight charges of $0.50 per unit it had paid on the original purchase. The units were defective and were returned two days after they were received c. Sales for the year totaled 75,000 units at $17 per unit. d. On December 28, 2018, Johnson purchased 5,600 additional units at $12 each. The goods were shipped fo.b. destination and arrived at Johnson's warehouse on January 4, 2019 e. 19,400 units were on hand at the end of 2018 Required: 1. Complete the below table to determine the ending inventory and cost of goods sold for 2018. 2. Assuming that operating expenses other than those indicated in the above transactions amounted to $162,000, determine income before income taxes for 2018

Answer 1

1.

Beginning inventory	128000
2018 Purchases	41684
Ending inventory	169684

Beginning Inventory		128000
Net purchases:
Purchases	960000
Freight in [80000*0.5]	40000
Purchase discounts [80000 - 1600 *12*2%]	-18816
Returns [1600*12.5]	-20000	961184
Cost of goods available for sale		1089184
Less: Ending inventory		169684
Cost of goods sold		919500

2.

Income before income taxes

193500

Workings:

Purchases	40800	[3400*12]
Freight in	1700	[5600*0.5]
Less: Purchase discounts	816	[3400*12*2%]
2018 purchases	41684

Sales	1275000
Less: Cost of goods sold	919500
Operating expenses	162000
Income before income taxes	193500