Comprehensive The following information for 2010 is available for the Marino Com

Question

Comprehensive The following information for 2010 is available for the Marino Company:
1. The beginning inventory is $100,000.
2. Purchases of $300,000 were made on terms of 2/10, n/30. Eighty percent of the discounts were taken.
3. Purchases returns of $4,000 were made.
4. At December 31, purchases of $20,000 were in transit, FOB destination, on terms of 2/10, n/30.
5. The company made sales of $640,000. The gross selling price per unit is twice the net cost of each unit sold.
6. Sales allowances of $6,000 were made.
7. The company uses the LIFO periodic method and the gross method for purchases discounts.
Required
1. Compute the cost of the ending inventory before the physical inventory is taken.
2. Compute the amount of the cost of goods sold that came from the purchases of the period and the amount that came
from the beginning inventory.

Explanation / Answer

Cost of the ending inventory before the physical inventory is taken: Beginning Inventory 100,000.00 Purchases (300000*80% *98%)- Discounted Purchases 235,200.00 Non Discounted Purchases 60,000.00 Less : Purchase Returns (4,000.00) Gross Purchases (FOB in transit ) 20,000.00 Cost of Goods Sold (320,000.00) Closing Inventory 91,200.00 Beginning Inventory 100,000.00 Purchases (300000*80% *98%)- Discounted Purchases 235,200.00 Non Discounted Purchases 60,000.00 Less : Purchase Returns (4,000.00) Gross Purchases (FOB in transit ) 20,000.00 Cost of Goods Sold (320,000.00) Closing Inventory 91,200.00
Since here LIFO method is used , Amount from purchases would be : $ 235,200 +$65,000=$300,200 Amount from opening Inventory :$19,800 Beginning Inventory 100,000.00 Purchases (300000*80% *98%)- Discounted Purchases 235,200.00 Non Discounted Purchases 60,000.00 Less : Purchase Returns (4,000.00) Gross Purchases (FOB in transit ) 20,000.00 Cost of Goods Sold (320,000.00) Closing Inventory 91,200.00

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