Question

USE THE INFORMATION BELOW TO ANSWER THE QUESTIONS 34 - 40 Purchases of inventory and sales information for the Baker Company (a retailer) are summarized below by quarter. Assume Baker Company began operations on January 1, 2019 (with zero inventory): Month Purchases in Units Cost per Unit January 14.000 $10 February 5,000 $10 March 3,000 $12 Quarter 1 sales = 14,000 units at $20 per unit April 4,000 May 9,000 June Quarter 2 sales = 17,000 units at S24 per unit $14 $18 $18 5.000 July 3,000 August 7,000 September 6,000 Quarter 3 sales = 24,000 units at $28 per unit $20 $21 $20 October 6,000 November 11,000 December 10.000 Quarter 4 sales = 22,000 units at $32 per unit $22 $24 $26 Given the information above, compute the following amounts (in dollars) for the period covering January 1, 2019 through December 31, 2019 (that is, for the entire year): 34. Cost of goods sold (FIFO) = 35. Gross profit (FIFO) = 36. Cost of goods sold (LIFO) = 37. Gross profit (LIFO) = 6 38. Did a LIFO layer reduction occur for Baker Company (assuming the company used the LIFO method) during the year? a. Yes b. No 39. If your answer to question 35 was YES, in which quarter? (If your answer to question 35 was NO, choose answer choice e a. Q1 b. Q2 c. Q3 d. 24 e. Baker Company did not have a LIFO layer reduction during the year. 40. If your answer to question 35 was YES and if the appropriate cost of inventory during the quarter in which the LIFO layer reduction occurred was the average cost of all units purchased during that quarter, fill in the dollar amount (on the line below) that the company reported in the following footnote to the 2019 annual report (if Baker did not experience a LIFO layer reduction in 2019, enter 0): Cost of goods sold has been reduced and operating income increased by $ in 2019 as a result of liquidations of LIFO inventories.

Please answer from 34 to 40.

Error

Question 38* instead of Question 35

Answer 1

		Purchase	Sales	Cost of Goods Sold Reduction on LIFO Liquidation
	Month	Units	Rate	Cost	Units	Rate	Value	Units	Rate	Value
	Jan	14,000	10	140,000				7,000	10	70,000
	Feb	5,000	10	50,000
	Mar	3,000	12	36,000
		22,000		226,000	14,000	20	280,000
	April	4,000	14	56,000				1,000	14	14,000
	May	9,000	18	162,000
	June	5,000	18	90,000
		18,000		308,000	17,000	24	408,000
	July	3,000	20	60,000
	Aug	7,000	21	147,000
	Sep	6,000	20	120,000
		16,000		327,000	24,000	28	672,000
	Oct	6,000	22	132,000
	Nov	11,000	24	264,000
	Dec	10,000	26	260,000
		27,000		656,000	22,000	32	704,000
	Totals	83,000		1,517,000	77,000		2,064,000	8,000		84,000
34 & 35
FIFO
	Month	Units	Rate	Value
Ending Inventory	Dec	6,000	26	156,000
Cost of Goods Sold				1,361,000
Sales				2,064,000
Gross Profit				703,000
36 & 37
LIFO
	Month	Units	Rate	Value
	Jan	1,000	10	10,000
	Oct	5,000	22	110,000
Ending Inventory		6,000		120,000
Cost of Goods Sold				1,397,000
Sales				2,064,000
Gross Profit				667,000
38
Yes
39
Q3
40
Cost of Goods Sold has been reduced & operating Income increased by $84,000 in 2019 as a result of liquidation of LIFO inventories.