Question

Hazelton Corporation uses a periodic inventory system and the LIFO method to value its inventory. The company began 2018 with $70,300 in inventory of its only product. The beginning inventory consisted of the following layers:

4,100 units at $7 per unit	$	28,700
5,200 units at $8 per unit		41,600
Total	$	70,300

During 2018, 6,100 units were purchased at $9 per unit and during 2019, 7,200 units were purchased at $10 per unit. Sales, in units, were 7,200 and 12,400 during 2018 and 2019, respectively.

Required:

1. Calculate cost of goods sold for 2018 and 2019.

2. Disregarding income tax, determine the LIFO liquidation profit or loss, if any, for 2018 and 2019.

Answer 1

Summary:

Year	Cost of goods Sold
2018	$63,700
2019	$112,500

Year	LIFO Liquidation Profit
2018	$1,100
2019	$11,500

Answer: Requirement 1: Under LIFO method items purchased in the last could be sold first. Therefore the cost of gods sold is the last items that purchased sold by backward working. Calculation of Cost of goods Sold Year Workings 2018 | 6,100 Units × $9 per Unit Amount(S $ 54,900 1,100 Units × $8 per Unit $ 63.700 $72,000 32,800 7,700 S 112,500 2019 | 7,200 Units x $10 per Unit 4,100 Units $8 per Unit 1,100 Units X $7 per Unit Requirement 2 Under LIFO liquidation when the current sales exceed purchases and resulting in the liquidation of any inventory not sold in a previous period Calculation of LIFO Liquidation Profit or Loss Year Workings 2018 | 1,100 Units $1 (S9-$8) Amount(S) $ 1100 S 1.100 Profit 20194,100 Units X $2 (S10 - $8) 1,100 Units x $3 ($10-$7) 8,200 3,300 $ 11,500 Profit Created by Universal Document Converter