Question

V1j7 Company began business on the first day of 2019. The following are the Company’s purchases of inventory:

Date                Inventory Items           Quantity                      Cost per unit

            March 17         Item A                         100 units $10

            May 19            Item B                       55 units $12

            Nov 14            Item C                         100 units $13

On October 20, 2019, 135 units were sold, for $40 each, leaving inventory of 120 units. The tax rate for 2019 was 25%. The Company has no other operating expenses and uses a periodic inventory system.

Required: Please choose the best answer to the following questions based on the above information.

Suppose the Company uses LIFO for inventory valuation. What is the balance of the inventory account on December 31, 2019?

multiple choice 1

• $1240

• $1440

• $1540

• $1200

Suppose the Company uses FIFO for inventory valuation. What is the net income for 2019?

multiple choice 2

• $2835

• $3980

• $2760

• $2985

Suppose the Company uses LIFO for inventory valuation and a perpetual inventory system. What is the gross profit for 2019?

multiple choice 3

• $3780

• $3980

• $3680

• $3940

Answer 1

Question 1

Correct answer-------------$1240

Question 2

Correct answer-------------$2985

Question 3

Correct answer-------------3680

Working

	Sales	Cost of Goods sold	Gross profit	Income before tax	Income tax expense	Net income
FIFO	$           5,400	$                   1,420	$             3,980	$      3,980	$              995	$             2,985
LIFO	$           5,400	$                   1,720	$             3,680	$      3,680	$              920	$             2,760

.

	Units	Cost per unit	value
Beginning Balance	0	$                          -	$ 0
Purchases
	100	$                   10.00	$ 1,000
	55	$                   12.00	$ 660
	100	$                   13.00	$ 1,300
Cost of goods available for sale	255		$ 2,960

.

FIFO
Total Units Available for sale		255
Units Sold		135
Closing Stock in Units		120
Valuation
Ending Inventory	100	@	$             13.00	$ 1,300
	20	@	$             12.00	$ 240
Value Of Ending Inventory				$ 1,540
Cost of Goods sold	2960 minus 1540			$        1,420.00
LIFO
Total Units Available for sale		255
Units Sold		135
Closing Stock in Units		120
Valuation
Ending Inventory	100	@	$             10.00	$ 1,000
	20	@	$             12.00	$ 240
Value Of Ending Inventory				$              1,240
Cost of Goods sold	2960 minus 1240			$              1,720