Johnson Corporation began the year with inventory of 20,000 units at $9/unit. Company uses perpetual inventory system/FIFO cost method?
a.Purchased 100,000 additional units at a cost of $12/unit. Terms of the purchases were 2/10, n/30, and 80% of purchases were paid within the 10-day discount period. The company uses the gross method to record purchase discounts. Merchandise was purchased f.o.b. shipping point and freight charges of $0.50/unit were paid by Johnson.
b.2,000 units purchased during the year were returned to suppliers for credit. Johnson was also given credit for freight charges of $0.50/unit it had paid on original purchase. Units were defective and were returned two days after they were received.
c.Sales for the year totaled 95,000 units at $18/unit.
d.On December 28, Johnson purchased 6,000 additional units at $12 each. Goods were shipped f.o.b. destination and arrived at Johnson’s warehouse on 1/4 of following year.
e.23,000 units were on hand at end of year.
1.Determine ending inventory & COGS at end of year.
2.Assuming operating expenses other than those indicated in above transactions amounted to $170,000, determine income before income taxes for the year.
3.For financial reporting purposes company uses LIFO (periodic inventory system). Record year-end adjusting entry for LIFO reserve, assuming balance in LIFO reserve at beginning of the year is $17,000.
4.Determine amount the company would report as income before taxes for the year under LIFO. Operating expenses other than those indicated in the above transactions amounted to $170,000
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