Question

25. Nicholas Industries had the following inventory transactions occur during 2014: Units Cost/unit 2/1/16 Purchase 54 $45 3/14/16 Purchase 93 $47 5/1/16 Purchase 66 $49 The company sold 150 units at $70 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, what is the company's after-tax income using FIFO? (rounded to whole dollars) a. $1,672 b. $1,840 c. $2,388 d. $2,628

Answer 1

Ans.	Given options are not correct. Right answer will be $2,486.
	*Working Notes:
	Units sold   =    150   units
	*Calculations for Cost of goods sold:
	Date	Units	Rate	Total
	1-Feb	54	$45.00	$2,430
	14-Mar	93	$47.00	$4,371
	1-May	3	$49.00	$147
	Cost of goods sold	150		$6,948
	*In FIFO method the units that have purchased first, are released the first one and the ending inventory
	units remain from the last purchases.
	*Total sales   =   Units sold * Unit selling price
	150 * $70   =   $10,500
	*Calculations for After tax net income using FIFO:
		FIFO
	Sales	$10,500
	Cost of goods sold	-$6,948
	Gross profit	$3,552
	Operating expenses	$0
	Income before taxes (a)	$3,552
	Income tax expenses (a*0.30)	-$1,066
	Net income	$2,486.40