Dole Industries had the following inventory transactions occur during 2017: $\begin{array}{lllll}&&\text { Units } & \text { Cost/unit } \
\text { Feb. 1.2017 } & \text { Purchase } & 90 & \$ 90 \
\text { Mar. 14.2017 } & \text { Purchase } & 155 & \$ 94 \
\text { Mav 1.2017 } & \text { Purchase } & 110 & \$ 98
\end{array}$ The company sold 255 units at $126 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, and operating expenses of $2,500, what is the company's after-tax income using LIFO? (rounded to whole dollars)
A)$5,220
B)$5,404
C)$4,186
D)$3,654

Question

Quizplus · Accepted Answer

Under LIFO, the last items purchased are the first to be sold. The cost of goods sold (COGS) is calculated using the most recent purchases: 110 units at $98 and 145 units at $94. Total COGS = (110 * $98) + (145 * $94) = $10,780 + $13,630 = $24,410. Revenue from sales = 255 units * $126 = $32,130. Gross profit = $32,130 - $24,410 = $7,720. Operating expenses = $2,500. Pre-tax income = $7,720 - $2,500 = $5,220. After-tax income = $5,220 * (1 - 0.30) = $3,654.

Dole Industries Had the Following Inventory Transactions Occur During 2017