Question

ABC Company employs a periodic inventory system and sells its inventory
to customers for $23 per unit. ABC Company had the following inventory
information available for the month of May:

May 1    Beginning inventory 1,500 units @ $12 cost per unit
May 8    Sold 1,100 units
May 13   Purchased 1,700 units @ $21 cost per unit
May 18   Sold 1,000 units
May 21   Purchased 1,600 units @ $18 cost per unit
May 28   Sold 800 units
May 30   Purchased 1,200 units @ $20 cost per unit

During May, ABC Company reported operating expenses of $5,000 and had
an income tax rate of 36%.

Calculate the amount of net income reported on ABC Company's income
statement for May using the LIFO method.

Answer 1

Correct Answer:

Requirement : Net Income = $ 4,352.00

Working:

Cost of Goods sold has to be calculated based on LIFO method first, then income statement needs to be prepared to calculate Net Income.

Cost of Goods Available for sale
	Units	Cost per unit	value
Beginning Inventory	1500	$          12.00	$     18,000.00
Purchases
13-May	1700	$          21.00	$     35,700.00
21-May	1600	$          18.00	$     28,800.00
30-May	1200	$          20.00	$     24,000.00
Total	6000		$ 1,06,500.00

LIFO (periodic Inventory)
Total Units Available for sale		6000		$                     1,06,500.00
Units Sold		2900
Ending Inventory Units		3100
Valuation
Cost of Goods sold	1100		$             20.00	$                        22,000.00
	100		$             20.00	$                           2,000.00
	900		$             18.00	$                       16,200.00
	700		$             18.00	$                        12,600.00
	100		$             21.00	$                           2,100.00
Total cost of Goods sold	2900			$                        54,900.00

ABC Company
Income Statement
Total Revenue	$                              66,700
Less: Cost of Goods Sold	$                              54,900
Gross Profit	$                              11,800
Less: Operating Expenses	$                                 5,000
Income before tax	$                                 6,800
Income tax	$                                 2,448
Net Income	$                                 4,352

End of answer.

Please Give Thumbs up. It will be highly appreciated.

Thanks.