Question

Ch 6 In class assignment-submitted in Canvas Salaries expense $100,000 Sales revenue $500,000 Inventory (begin) 17,000 Interest income 10,000 Sales returns 2,000 Cost of goods sold 320,000 Utilities expense 3,000 Rent Expense 12,000 Income tax expense 15,000 Interest expense 1,000 Inventory (end) 12,000 Determine: 1. Net sales $ 2. Gross profit 3. Operating expenses $ 4. Operating income $ 5. Pretax income (IBT) 6. Net income 7. Purchases 8. Gross profit ratio (two decimal places) ____% $ Use the following for 9 and 10 Units Cost per unit Beginning inventory 30 $62.00 Purchase 1 300 $63.00 Purchase 2 200 $64.00 The company sold 520 units 9. Determine ending inventory using FIFO: $ 10. Determine ending inventory using LIFO: $

Answer 1

Answer-1)- Net Sales= Sales revenue- Sales returns

= $500000-$2000

= $498000

2)- Gross profit= Net sales-Cost of goods sold

= $498000-$320000

= $178000

3)- Operating expenses = Salaries expense+ Utilities expense+ Rent expense

= $100000+$3000+$12000

= $115000

4)- Operating income = Gross profit- Operating expenses

= $178000-$115000

= $63000

5)- Pre-tax income (IBT)= Operating income+ (Interest income-Interest expense)

= $63000+ ($10000-$1000)

= $72000

6)- Net income = Pre-tax income (IBT)- Income tax expense

= $72000-$15000

= $57000

7)- Purchases =$315000.

Explanation- Cost of goods sold = Opening inventory+ Purchases-Ending inventory

$320000 = $17000+Purchases-$12000

Purchases = $315000

8)- Gross profit ratio = (Gross profit/Net sales)*100

= ($178000/$498000)*100

= 35.74%

Answer-9)- Ending inventory using FIFO =$640.

Explanation-

FIFO Method
Goods purchased			Cost of goods sold			Inventory balance
S.no.	# of units	Cost per unit	Total cost	# of units sold	Cost per unit	Cost of goods sold	# of units	Cost per unit	Inventory balance
1							30	62	1860
2	300	63	18900				30	62	1860
							300	63	18900
3	200	64	12800				30	62	1860
							300	63	18900
							200	64	12800
4				30	62	1860	10	64	640
				300	63	18900
				190	64	12160
Totals				520		32920	10	64	640

10)-  Ending inventory using LIFO =$620.

Explanation-

LIFO Method
Goods purchased			Cost of goods sold			Inventory balance
S.no.	# of units	Cost per unit	Total cost	# of units sold	Cost per unit	Cost of goods sold	# of units	Cost per unit	Inventory balance
1							30	62	1860
2	300	63	18900				30	62	1860
							300	63	18900
3	200	64	12800				30	62	1860
							300	63	18900
							200	64	12800
4				200	64	12800	10	62	620
				300	63	18900
				20	62	1240
Totals				520		32940	10	62	620