Question

Larson Company employs a periodic inventory system and reported the
following inventory information for the month of August:

August 1    Beginning inventory 2,600 units @ $27 cost per unit
August 6    Sold 1,100 units
August 15   Purchased 1,400 units @ $36 cost per unit
August 18   Sold 1,500 units
August 23   Purchased 900 units @ $29 cost per unit
August 26   Purchased 600 units @ $23 cost per unit
August 29   Sold 2,300 units
August 30   Purchased 1,500 units @ $40 cost per unit

During August, Larson Company reported operating expenses of $29,000
and had an income tax rate of 39%.

Using the weighted average method, Larson Company's gross profit for
August totaled $71,050.

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

Answer 1

Ans.	We will use the weighted average gross profit to calculate total sales. To find out this we need to
	compute cost of goods sold under weighted average method.
	Total units sold (1,100 + 1,500 + 2,300)   =   4,900 units
	Average cost:	Cost of goods available for sale			Cost of goods sold - Periodic Average cost			Ending inventory - Periodic Average cost
		Units	Rate	Total	Units	Rate	Total	Units	Rate	Total
	Beginning inventory	2600	$27.00	$70,200
	Purchases:
	15-Aug	1400	$36.00	$50,400
	23-Aug	900	$29.00	$26,100
	26-Aug	600	$23.00	$13,800
	30-Aug	1500	$40.00	$60,000
	Total	7000		$220,500	4900	$31.50	$154,350	2100	$31.50	$66,150
	Average cost per unit =   Total cost of goods available for sale / Units available for sale
			$88,000 / 11,000
			$31.50		per unit
	*Calculation of Total sales:
	Cost of goods sold	$154,350
	Add: Gross profit	$71,050
	Total sales	$225,400
	Now we will calculate cost of goods sold under LIFO periodic method to calculate the amount
	of net income.
	Total units sold (1,100 + 1,500 + 2,300)   =   4,900 units
	LIFO:	Cost of goods available for sale			Cost of goods sold - Periodic LIFO			Ending inventory - Periodic LIFO
		Units	Rate	Total	Units	Rate	Total	Units	Rate	Total
	Beginning inventory	2600	$27.00	$70,200	500	$27.00	$13,500	2100	$27.00	$56,700
	Purchases:
	15-Aug	1400	$36.00	$50,400	1400	$36.00	$50,400
	23-Aug	900	$29.00	$26,100	900	$29.00	$26,100
	26-Aug	600	$23.00	$13,800	600	$23.00	$13,800
	30-Aug	1500	$40.00	$60,000	1500	$40.00	$60,000
	Total	7000		$220,500	4900		$163,800	2100		$56,700
	*In LIFO method the units that have purchased last, are released the first one and ending inventory units
	remain from the first purchase.
	*Calculations of Net income:
	Particulars	LIFO   Amount
	Sales	$225,400
	Cost of goods sold	-$163,800
	Gross profit	$61,600
	Operating expense	-$29,000
	Income before taxes (a)	$32,600
	Income tax expenses (a*0.39)	-$12,714
	Net income	$19,886