The Divine Merchandising Corporation began March operations with merchandise inv

Question

The Divine Merchandising Corporation began March operations with merchandise inventory of 6 units, each of which cost $27. During March, Divine Merchandising made the following purchases: (1) March 4, 12 units @ $28 per unit, (2) March 15, 18 units @ $30 per unit, (3) March 26, 14 units @ $32 per unit. During March the Divine Merchandising Company sold the following units at a sales price of $48 per unit: March 6, 11 units, March 20, 17 units, and March 28, 12 units. Operating expenses in March were $640. The Company estimates its income taxes expense will be approximately 35% of income before taxes.

Using the LIFO perpetual inventory method, determine the net income for March. Round your answer to the nearest whole dollar.

$718

$27

$51

$78

$1,920

a.

$718

b.

$27

c.

$51

d.

$78

e.

$1,920

Explanation / Answer

As per LIFO method Quantity which is last comes in first sold.

Date Particulars Quantity Rate Amount Profit Earned 03/01/xx Opening Inventory 6 27 162 03/04/xx Purchase 12 28 336 03/06/xx Sales 11 48 528 220 03/15/xx Purchase 18 30 540 03/20/xx Sales 17 48 816 306 03/26/xx Purchase 14 32 448 03/28/xx Sales 12 48 576 192 Operating expenses 640 Profit before tax 78 Tax @ 35% 27.3 Net Income 50.7 So Answer is 51 , Option C WORKING NOTE Calculation of profit: 03/06/xx Sales 11 48 528 03/04/xx Purchase 11 28 308 Profit 220 03/20/xx Sales 17 48 816 03/15/xx Purchase 17 30 510 Profit 306 03/28/xx Sales 12 48 576 03/26/xx Purchase 12 32 384 192

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