5) During the month of December, Brooklyn Bicycles reported the following invent

Question

5) During the month of December, Brooklyn Bicycles reported the following inventory transactions Units Cost 35 120.00 Purchase Purchase Sold Purchase Sold 47) $ 225.00 76 $ 140.00 (98) S 298.00 During the period, Brooklyn incurred $8,500 in additional operating expenses. Note: Brooklyn uses a periodic inventory system, has an income tax rate of 30% and had no beginning inventory. (8 points) Required: a. Prepare a multi-step income statement for Brooklyn, assuming that it uses the LIFO inventory valuation and a periodic system. b. Determine the ending inventory balance that would appear on Brooklyn's balance sheet at the end of December. SHOW ALL YOUR WORK.

Explanation / Answer

a) Prepare multistep income statement :

Ending inventory = 21*120 = 2520

Sales 39779 Less; Cost of goods sold (76*140+55*125+14*120) (19195) Gross profit 20584 Less; Operating expense (8500) Income before tax 12084 Less; Income tax (3625.20) Net income 8458.80

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