Question

In: Accounting

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 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

ekkarill92 answered 1 year ago
Next > < Previous

Related 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 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...
Cansela Corporation reports inventory and cost of goods sold based on calculations from a LIFO periodic...
Cansela Corporation reports inventory and cost of goods sold based on calculations from a LIFO periodic inventory system. The company began 2021 with inventory of 7,000 units of its only 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....
Calculate cost of ending inventory and cost of goods sold using periodic FIFO, LIFO, and Weighted...
Calculate cost of ending inventory and cost of goods sold using periodic FIFO, LIFO, and Weighted Average Cost methods. Description # of units Cost per unit Beginning inventory: 20 20 Jan.15 Purchase: 22 27 Jan. 20 Sale 10 blank Jan.25 Purchase 18 25 Jan.28 Sale   15 blank
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 inventory....
Periodic inventory by three methods; cost of goods sold
Periodic inventory by three methods; cost of goods soldThe units of an item available for sale during the year were as follows:Jan. 1Inventory180units at $108Mar. 10Purchase224units at $110Aug. 30Purchase200units at $116Dec. 12Purchase196units at $120There are 208 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the ending inventory cost and the cost of goods sold by three methods.Cost of Inventory and Cost of Goods SoldInventory MethodEnding InventoryCost of Goods SoldFirst-in, first-out...
Calculation of Cost of Goods Sold: Periodic Inventory System Prepare the cost of goods sold section...
Calculation of Cost of Goods Sold: Periodic Inventory System Prepare the cost of goods sold section for Adams Gift Shop. The following amounts are known: Beginning merchandise inventory $27,050 Ending merchandise inventory 22,550 Purchases 77,125 Purchases returns and allowances 4,055 Purchases discounts 5,745 Freight-in 230 Adams Gift Shop Cost of Goods Sold Cost of goods sold: $ $ $ $ $ Cost of goods sold $
Calculate the cost of goods sold and the cost of the ending inventory using the LIFO...
Calculate the cost of goods sold and the cost of the ending inventory using the LIFO periodic cost flow assumption. Sales 97 units at $ 18 per unit Beginning inventory 88 units at $ 6 per unit Purchases 58 units at $ 10 per unit Calculate the cost of goods sold using the LIFO periodic cost flow assumption. Units x Cost per Unit = Total Cost Units from beginning inventory x = Units from purchase x = Cost of Goods...
Computing Cost of Goods Sold and Ending Inventory. Bartov Corporation reports the following beginning inventory and...
Computing Cost of Goods Sold and Ending Inventory. Bartov Corporation reports the following beginning inventory and purchases for 2017 Beginning Inventory 300 @ $8 each $2,400 Inventory Purchased 700 @ $10 each 7,000 Cost of goods available 1,000 units $9,400 Bartov sells 600 of these units in 2017. Compute its cost of goods sold for 2017 and the ending inventory reported on its 2017 balance sheet under each of the following inventory costing methods. (Do not round until final answer....
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT