Johnson Corporation began 2016 with inventory of 12,000 units of its only produc
ID: 2778100 • Letter: J
Question
Johnson Corporation began 2016 with inventory of 12,000 units of its only product. The units cost $8 each. The company uses a periodic inventory system and the LIFO cost method. The following transactions occurred during 2016:
Purchased 60,000 additional units at a cost of $10 per unit. Terms of the purchases were 2/10, n/30, and 100% of the purchases were paid for within the 10-day discount period. The company uses the gross method to record purchase discounts. The merchandise was purchased f.o.b. shipping point and freight charges of $0.60 per unit were paid by Johnson.
1,200 units purchased during the year were returned to suppliers for credit. Johnson was also given credit for the freight charges of $0.60 per unit it had paid on the original purchase. The units were defective and were returned two days after they were received.
On December 28, 2016, Johnson purchased 5,200 additional units at $11 each. The goods were shipped f.o.b. destination and arrived at Johnson's warehouse on January 4, 2017.
Complete the below table to determine the ending inventory and cost of goods sold for 2016. (Do not round your intermediate calculations. Amounts to be deducted should be indicated with a minus sign.)
Assuming that operating expenses other than those indicated in the above transactions amounted to $154,000, determine income before income taxes for 2016. (Do not round your intermediate calculations.)
rev: 03_20_2015_QC_CS-11361
References
eBook & Resources
WorksheetLearning Objective: 08-01 Explain the difference between a perpetual inventory system and a periodic inventory system.Learning Objective: 08-03 Determine the expenditures that should be included in the cost of inventory.
Difficulty: 2 MediumLearning Objective: 08-02 Explain which physical quantities of goods should be included in inventory.Learning Objective: 08-04 Differentiate between the specific identification, FIFO, LIFO, and average cost methods used to determine the cost of ending inventory and cost of goods sold.
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Johnson Corporation began 2016 with inventory of 12,000 units of its only product. The units cost $8 each. The company uses a periodic inventory system and the LIFO cost method. The following transactions occurred during 2016:
Explanation / Answer
Part 1
Ending Inventory = 96000+38000 = 134000
Goods In Transit = 57,200
Total Inventory = 134000+57200 = 191200
Computation of Cost of Goods Sold
Part 2
Particulars Receipt Issue Balance Unit Rate Amount Unit Rate Amount Unit Rate Amount Opening Bal. 12,000 8 96,000 Purchases 60,000 10 6,00,000 12,000 8 96,000 60,000 10 6,00,000 Returned to supplier 1,200 10 12,000 12,000 8 96,000 58,800 10 5,88,000 Sales Made 55,000 10 5,50,000 12,000 8 96,000 3,800 10 38,000 Goods In Transit 5,200 11 57,200Related Questions
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