Use the following information for 123 and 124
Hay Company had January 1 inventory of $180,000 when it adopted dollar-value LIFO. During the year, purchases were $1,080,000 and sales were $1,800,000. December 31 inventory at year-end prices was $227,700, and the price index was 110.
-What is Hay Company's gross profit?
A) $747,000.
B) $749,700.
C) $767,700.
D) $1,590,300.

Question

Quizplus · Accepted Answer

1. Calculate the ending inventory at base year prices using the price index: 
$227,700 ÷ 1.1 = $207,000
2. Calculate the total inventory at base year prices: 
$180,000 + $1,080,000 = $1,260,000
3. Calculate the COGS at base year prices: 
$1,260,000 – $207,000 = $1,053,000
4. Calculate the gross profit: 
Sales – COGS = $1,800,000 – $1,053,000 = $747,000
Therefore, the answer is B) $749,700.

Use the Following Information for 123 and 124