P 84 Various inventory transactions determining inventory an

P 8-4 Various inventory transactions, determining inventory and cost of goods LO8-1 through LO8-4 Johnson Corporation began 2018 with inventory of 10,000 units of its only uses a periodic inventory system and the LIFO cost method. The following transactions occurred during 2018: Page 455 product. The units cost $8 each. The company a. Purchased 50,000 additional units at a cost of S10 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 merchandise was purchased f.o.b. shipping point and freight charges of S0.50 per unit were paid by Johnson 1,000 units purchased during the year were returned to suppliers for credit. Johnson was also given credit for the freight charges of $0.5 they were received b. 0 per unit it had paid on the original purchase. The units were defective and were returned two days after c. Sales for the year totaled 45.000 units at $18 per unit. d. On December 28, 2018, Johnson purchased 5,000 additional units at S10 each. The goods were shi e. 14,000 units were on hand at the end of 2018. Required: destination and arrived at Johnson\'s warehouse on January 4, 2019. 1. Determine ending inventory and cost of goods sold for 2018. g that operating expenses other than those indicated in the above transactions amounted to S150.000, determine income before income taxes for 2018.

Solution

According to goods are first sold from last purchase. As per given question last purchase of 2018 is purchase of 50000 units. Goods purchased on December 28 will not included in 2018 in warehouse they in January 2019.

From 50000 units purchased 1000 are returned, so there remains 49000

So 45000 units are sold from 49000 units

So ending inventory includes 10000 (beginning balance) + 4000 (49000-45000) =14000 units

Purchase price per unit

Cost = $10

+ Freight = $0.50

- purchase discounts 2% (10*2%) =0.20

Purchase price per unit = $10.30

Part 1

Ending inventory = (10000*8)+(4000*10.30) = $121200

Cost of goods sold = units sold * cost per unit = 45000*10.30 = 463500

Part 2

Sales revenue (45000*18) = 810000

Less: cost of goods sold = 463500

Gross profit = 346500

Less: Operating expenses = 150000

Income before taxes = 196500