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Taylor Corporation reports inventory and cost of goods sold based on calculations from a LIFO periodic inventory system.
Taylor Corporation reports inventory and cost of goods sold based on calculations from a LIFO periodic inventory system. The company’s records under this system reveal the following inventory layers at the beginning of 2021 (listed in chronological order of acquisition):
10,000 units @ $15..........................$150,000
15,000 units @ $20............................300,000
Beginning inventory........................$450,000
During 2021, 30,000 units were purchased for $25 per unit. Due to unexpected demand for the company’s product, 2021 sales totaled 40,000 units at various prices, leaving 15,000 units in ending inventory.
Required:
1. Calculate the amount to report for cost of goods sold for 2021.
2. Determine the amount of LIFO liquidation profit that the company must report in a disclosure note to its 2021 financial statements. Assume an income tax rate of 25%.
3. If the company decided to purchase an additional 10,000 units at $25 per unit at the end of the year, how much income tax currently payable would be saved?
Solutions
Expert Solution
| 1. | Cost of goods sold for 2021 | ||
| Latest purchase | 30000*25 | $750000 | |
| Previous purchase | 10000*20 | $200000 | |
| Cost of goods sold | $950000 | ||
| 2. | Unit Included in cost of goods sold are 9,000 units from beginning inventory purchased at $20 that have now been liquidated. |
| If the company had purchased at least 40,000 units, no liquidation would have occurred. Then cost of goods sold would have been = 40,000 units * $25 per unit = $ 1,000,000 instead of$ 950,000. | |
| The difference between these two cost of goods sold = $1000000 - 950,000 = $50000 which is the before tax LIFO liquidation profit. | |
| net effect of the liquidation is to increase net income =50,000*(1-0.25%) = $37500 |
| 3. | If the company decided to purchase an additional 10,000 units at $25 per unit at the end of the year, |
| Income tax currently payable would be saved =10000*(25-20)*25% = $12500 |
| 1. | Cost of goods sold for 2021 | ||
| Latest purchase | 30000*25 | $750000 | |
| Previous purchase | 10000*20 | $200000 | |
Junaid answered 2 years agoRelated Solutions
Taylor Corporation reports inventory and cost of goods sold based on calculations from a LIFO periodic...
Taylor Corporation reports inventory and cost of goods sold
based on calculations from a LIFO periodic inventory system. The
company’s records under this system reveal the following inventory
layers at the beginning of 2021 (listed in chronological order of
acquisition):
15,000 units @ $10
$
150,000
20,000 units @ $15
300,000
Beginning inventory
$
450,000
During 2021, 40,000 units were purchased for $20 per unit. Due to
unexpected demand for the company's product, 2021 sales totaled
49,000 units at various...
Taylor Corporation reports inventory and cost of goods sold based on calculations from a LIFO periodic...
Taylor Corporation reports inventory and cost of goods sold
based on calculations from a LIFO periodic inventory system. The
company’s records under this system reveal the following inventory
layers at the beginning of 2021 (listed in chronological order of
acquisition):
15,000 units @ $10
$
150,000
20,000 units @ $15
300,000
Beginning inventory
$
450,000
During 2021, 40,000 units were purchased for $20 per unit. Due to
unexpected demand for the company's product, 2021 sales totaled
49,000 units at various...
Taylor Corporation reports inventory and cost of goods sold based on calculations from a LIFO periodic...
Taylor Corporation reports inventory and cost of goods sold
based on calculations from a LIFO periodic inventory system. The
company’s records under this system reveal the following inventory
layers at the beginning of 2021 (listed in chronological order of
acquisition):
10,000 units @ $15
$
150,000
15,000 units @ $20
300,000
Beginning inventory
$
450,000
During 2021, 30,000 units were purchased for $25 per unit. Due to
unexpected demand for the company’s product, 2021 sales totaled
40,000 units at various...
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product. The beginning inventory balance of $88,000 consisted of
the following layers:
2,500 units at $10 per unit
=
$
25,000
4,500 units at $14 per unit
=
63,000
Beginning inventory
$
88,000
During the three years 2021–2023 the cost of inventory remained
constant at $16 per unit....
Taylor Corporation has used a periodic inventory system and the LIFO cost method since its inception...
Taylor Corporation has
used a periodic inventory system and the LIFO cost method since its
inception in 2011. The company began 2018 with the following
inventory layers (listed in chronological order of
acquisition):
15,000 units @
$10
$
150,000
20,000 units @
$15
300,000
Beginning
inventory
$
450,000
During 2018, 40,000 units were purchased for $20 per unit. Due to
unexpected demand for the company's product, 2018 sales totaled
49,000 units at various prices, leaving 26,000 units in ending
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Calculate cost of ending inventory and cost of goods sold
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Description # of units Cost per unit
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Jan.28 Sale 15 blank
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10,000 units at a cost of $10.00 per unit = 100,000
During 2021, inventory quantity declined by 14,000 units. All units
purchased during 2021 cost $13.00 per unit.
Required:
Calculate the before-tax LIFO liquidation...
In a periodic inventory system, the formula used in computing the cost of goods sold may...
In a periodic inventory system, the formula used in computing
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Select one:
A.
Beginning inventory + purchases - net sales.
B.
Balance in the Cost of Goods Sold account, less the balance in
the Inventory Shrinkage account.
C.
Beginning inventory + purchases - ending inventory.
D.
Ending inventory + purchases - net sales.
in a periodic inventory system, cost of goods sold is recorded as each same of merchandise...
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as each same of merchandise occurs true/false
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