Hazelton Corporation uses a periodic inventory system and the LIFO method to val
ID: 2530710 • Letter: H
Question
Hazelton Corporation uses a periodic inventory system and the LIFO method to value its inventory. The company began 2018 with $84,100 in inventory of its only product. The beginning inventory consisted of the following layers:
During 2018, 6,700 units were purchased at $9 per unit and during 2019, 8,400 units were purchased at $10 per unit. Sales, in units, were 8,400 and 14,800 during 2018 and 2019, respectively.
Required:
1. Calculate cost of goods sold for 2018 and 2019.
2. Disregarding income tax, determine the LIFO liquidation profit or loss, if any, for 2018 and 2019.
-Calculate cost of goods sold for 2018 and 2019.
-Disregarding income tax, determine the LIFO liquidation profit or loss, if any, for 2018 and 2019.?-
4,700 units at $7 per unit $ 32,900 6,400 units at $8 per unit 51,200 Total $ 84,100Explanation / Answer
Answer:
Part 1
Calculation of Cost of Goods sold
2018
Units sold = 8400
Units purchased = 6700 @ $9 per unit
Balance units after adjusted by purchase of 2018 = 8400-6700 = 1700units
Cost of goods sold = [6700*9 +1700 *8]
= $73,900
2019
Units sold = 14800
Units purchased = 8400 @ $10 per unit
Balance units after adjusted by purchase of 2019 = 14800-8400 = 6400 units
Balance units in second layer of beginning inventory after 2018 = 6400-1700 = 4700units
Cost of goods sold = [8400*10 + 4700*8 +(14800-8400-4700) * 7]
= $1,33,500
Part 2
Calculation of LIFO liquidation profit/loss
2018
Units liquidated = 8400 – 6700 = 1700 units
Before tax liquidation profit = 1700* ($9 - $8)
= $1700
2019
Units liquidated = 14800 – 8400 = 6400units
Before tax liquidation profit = 4700 ($10- $8) + 1700 ($10 - $7)
= $14500
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