Question

Johnson Corporation began 2018 with inventory of 22,000 units of its only product. The units cost $7 each. The company uses a periodic inventory system and the LIFO cost method. The following transactions occurred during 2018: Purchased 110,000 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 f.o.b. shipping point and freight charges of $0.40 per unit were paid by Johnson. 2,200 units purchased during the year were returned to suppliers for credit. Johnson was also given credit for the freight charges of $0.40 per unit it had paid on the original purchase. The units were defective and were returned two days after they were received. Sales for the year totaled 105,000 units at $19 per unit. On December 28, 2018, Johnson purchased 6,200 additional units at $10 each. The goods were shipped f.o.b. destination and arrived at Johnson's warehouse on January 4, 2019. 24,800 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 $174,000, determine income before income taxes for 2018.

Complete this question by entering your answers in the tabs below. Required 1 Required 2 Complete the below table to determine the ending inventory and cost of goods sold for 2018. (Do not round your intermediate calculations. Amounts to be deducted should be indicated with a minus sign.) $154,000 Beginning inventory 2018 purchases 34,048 $ 188,048 Ending inventory Beginning inventory $ 154,000 Net purchases: $ 1,320,000 Purchases Purchase discounts Returns Freight-in 1,320,000 Cost of goods available for sale 1,474,000 (188,048) $ 1,285,952 Less: Ending inventory Cost of goods sold Required 1 Required 2 Required 1 Required 2 Assuming that operating expenses other than those indicated in the above transactions amounted to $174,000, determine income before income taxes for 2018. (Do not round your intermediate calculations.) Income before income taxes Required1 Required 2

Answer 1

Compute the ending inventorv and cost of goods sold as shown below: Particulars Workin Amount (S Beginning inventory @22,000 units 22,000*$7 154,000 2016 Purchases @2,800 units (24,800-22,000) (1,310,848/107800*2,800) 34,048 Ending invento 188,048 Particulars Amount (S Amount (S Beginning inventory (22,000 $7 154,000 Net Purchases: 107.800 units (110,000-2,200) Purchases (110,000 $12) 1,320.000 Returns (27,280 (25,872 Purchase discounts 44,000 Freight-in (110.000 $0.4 1.310.848 Cost of goods available for sale 1,464,848 Less: Ending invento (188,048) Cost of gioods sold 1,276,800 Note: Returns - (2,200x$12) + (2, 200x S0.4) Returns $26,400+ $880 Returns- $27,280 Purchase di scounts = (110.000 units-2. 200 units) × $12 × 2% Purchase di scounts 107800 x$12 x 2% Purchase di scounts-$25,872

Compute the income before taxes as shown below: Amount (S) Particulars sales (105.000*$19) 1995000 Less: Cost of good sold (1,276,800) Gross profit 718,200 -174000 Less: Operating expenses Income before income taxes544,200