Eneri Company's inventory records show the following data: A physical inventory on December 31 shows 4,000 units on hand. Eneri sells the units for $13 each. The company has an effective tax rate of 20%. Eneri uses the periodic inventory method. What is the cost of goods available for sale?

Question

Eneri Company's inventory records show the following data:  A physical inventory on December 31 shows 4,000 units on hand. Eneri sells the units for $13 each. The company has an effective tax rate of 20%. Eneri uses the periodic inventory method. What is the cost of goods available for sale?

Quizplus · Accepted Answer

The cost of goods available for sale can be calculated using the following formula:

Beginning Inventory + Purchases = Cost of Goods Available for Sale

We are given the beginning inventory, purchases, and we can calculate the cost per unit using the information given.

Beginning Inventory = 3,000 units at $7 per unit = $21,000
Purchases (10,000 units at $8 per unit) = $80,000

Therefore, the cost of goods available for sale = $21,000 + $80,000 = $101,000

Since we are given that 4,000 units were sold, we can calculate cost of goods sold using the following formula:

Cost of Goods Sold = Units Sold x Cost per Unit = 4,000 x $7 = $28,000

Finally, we can calculate the gross profit using the following formula:

Gross Profit = Sales - Cost of Goods Sold

Sales = 4,000 units x $13 per unit = $52,000

Gross Profit = $52,000 - $28,000 = $24,000

Now, we can calculate the net income using the following formula:

Net Income = Gross Profit x (1 - Effective Tax Rate)

Net Income = $24,000 x (1 - 0.20) = $19,200

Therefore, the cost of goods available for sale is $101,000. Answer choice C is the only option that matches this calculation.

Eneri Company's Inventory Records Show the Following Data: a Physical