Nicholas Industries had the following inventory transactions occur during 2014: $$\begin{array} { l l c c }
&& \text { Units } & \text { Cost/unit } \
2 / 1 / 16 & \text { Purchase } & 54 & \$ 45 \
3 / 14 / 16 & \text { Purchase } & 93 & \$ 47 \
5 / 1 / 16 & \text { Purchase } & 66 & \$ 49
\end{array}$$ The company sold 140 units at $65 each and has a tax rate of 30%. Assuming that a periodic inventory system is used what is the company's gross profit using LIFO? (rounded to whole dollars)
A) $2388
B) $2678
C) $6472
D) $6712

Question

Nicholas Industries had the following inventory transactions occur during 2014: $$\begin{array} { l l c c } 
&& \text { Units } & \text { Cost/unit } \
2 / 1 / 16 & \text { Purchase } & 54 & \$ 45 \
3 / 14 / 16 & \text { Purchase } & 93 & \$ 47 \
5 / 1 / 16 & \text { Purchase } & 66 & \$ 49
\end{array}$$ The company sold 140 units at $65 each and has a tax rate of 30%. Assuming that a periodic inventory system is used what is the company's gross profit using LIFO? (rounded to whole dollars)
A) $2388
B) $2678
C) $6472
D) $6712

Quizplus · Accepted Answer

LIFO (Last-In, First-Out) assumes that the most recently purchased inventory is the first to be sold. Therefore, the cost of goods sold for the 140 units sold would be:66 units @ $49 = $3,23474 units @ $47 = $3,498Total cost of goods sold = $6,732Gross profit = Sales - Cost of goods soldGross profit = $9,100 - $6,732Gross profit = $2,368

Nicholas Industries Had the Following Inventory Transactions Occur During 2014