Reference no: EM133022306
Question - Johnson Corporation began the year with inventory of 22,000 units of its only product. The units cost $7 each. The company uses a perpetual inventory system and the FIFO cost method. The following transactions occurred during the year:
-Purchased 110,000 additional units at a cost of $12 per unit. Terms of the purchases were 2/10, n/30, and 100% of the purchases were paid for within the 10-day discount period. The company uses the gross method to record purchase discounts. The merchandise was purchased f.o.b. shipping point and freight charges of $0.40 per unit were paid by Johnson.
-2,200 units purchased during the year were returned to suppliers for credit. Johnson was also given credit for the freight charges of $0.40 per unit it had paid on the original purchase. The units were defective and were returned two days after they were received.
-Sales for the year totaled 105,000 units at $19 per unit.
-On December 28, Johnson purchased 6,200 additional units at $10 each. The goods were shipped f.o.b. destination and arrived at Johnson's warehouse on January 4 of the following year.
-24,800 units were on hand at the end of the year.
Required -
-Determine ending inventory and cost of goods sold at the end of the year.
-Assuming that operating expenses other than those indicated in the above transactions amounted to $174,000, determine income before income taxes for the year.
-For financial reporting purposes, the company uses LIFO (amounts based on a periodic inventory system). Record the year-end adjusting entry for the LIFO reserve, assuming the balance in the LIFO reserve at the beginning of the year is $17,400.
-Determine the amount the company would report as income before taxes for the year under LIFO. Operating expenses other than those indicated in the above transactions amounted to $174,000.
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