Hazelton Corporation uses a periodic inventory system and the LIFO method to val
ID: 2582475 • Letter: H
Question
Hazelton Corporation uses a periodic inventory system and the LIFO method to value its inventory. The company began 2016 with $59,000 in inventory of its only product. The beginning inventory consisted of the following layers: 4,000 units at $6 per unit 24,000 5,000 units at $7 per unit 35,000 Total $59,000 During 2016, 6,000 units were purchased at $8 per unit and during 2017, 7,000 units were purchased at $9 per unit. Sales, in units, were 7,000 and 12,000 during 2016 and 2017, respectively 1. Calculate cost of goods sold for 2016 and 2017 2. Disregarding income tax, determine the LIFO liquidation profit or loss, if any, for 2016 and 2017Explanation / Answer
Year
DETAILS
AMOUNT
$
2016
Brought fwd
4000 x $6
24000
5000x$7
35000
PURCHASES
6000 X $8
48000
SALES 7000 UNITS
Allocated as
LATEST
6000 x $8
48000
BEFORE LATEST 1000 x $7
7000
THUS CLOSING INVENTORY
4000 X $6
4000 X $7
24000
28000
52000
COST OF SALES
OPENING INV
59000
55000
+PURCHASES
48000
LESS CLOSING INVENTORY
52000
2017
PURCHASES
7000 X $9
63000
SALES 12000 UNITS
Allocated as:
Latest
7000 x $9
63000
Before
Latest
4000 x $7
28000
Earliest
1000 x$6
6000
THUS CLOSING INVENTORY
3000 X $6
18000
COST OF SALES
OPENING INV
52000
+PURCHASES
63000
LESS CLOSING INVENTORY
18000
97000
Year
DETAILS
AMOUNT
$
2016
Brought fwd
4000 x $6
24000
5000x$7
35000
PURCHASES
6000 X $8
48000
SALES 7000 UNITS
Allocated as
LATEST
6000 x $8
48000
BEFORE LATEST 1000 x $7
7000
THUS CLOSING INVENTORY
4000 X $6
4000 X $7
24000
28000
52000
COST OF SALES
OPENING INV
59000
55000
+PURCHASES
48000
LESS CLOSING INVENTORY
52000
2017
PURCHASES
7000 X $9
63000
SALES 12000 UNITS
Allocated as:
Latest
7000 x $9
63000
Before
Latest
4000 x $7
28000
Earliest
1000 x$6
6000
THUS CLOSING INVENTORY
3000 X $6
18000
COST OF SALES
OPENING INV
52000
+PURCHASES
63000
LESS CLOSING INVENTORY
18000
97000
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