Reference no: EM132884400
Question - Johnson Corporation began the year with inventory of 23,000 units of its only product. The units cost $8 each. The company uses a perpetual inventory system and the FIFO cost method. The following transactions occurred during the year:
-Purchased 115,000 additional units at a cost of $10 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 $0.60 per unit were paid by Johnson.
-2,300 units purchased during the year were returned to suppliers for credit. Johnson was also given credit for the freight charges of $0.60 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 110,000 units at $16 per unit.
-On December 28, Johnson purchased 6,300 additional units at $12 each. The goods were shipped f.o.b. destination and arrived at Johnson's warehouse on January 4 of the following year.
-25,700 units were on hand at the end of the year.
Required - 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 $176,000.