Henri Company's inventory records show the following data: $\begin{array}{llrr}
&&\text { Units }&\text { Unit Cost }\
\text { Inventory,}&\text { January 1 } & 10,000 & \$ 9.20 \
\text { Purchases: } & \text { June } 18 & 9,000 & 8.00 \
&\text { November 8 } & 6,000 & 7.25
\end{array}$

A physical inventory on December 31 shows 3000 units on hand. Henri sells the units for $12 each. The company has an effective tax rate of 20%. Henri uses the periodic inventory method. What is the cost of goods available for sale?
A) $170700
B) $178500
C) $207500
D) $300000

Question

Henri Company's inventory records show the following data: $\begin{array}{llrr}
&&\text { Units }&\text { Unit Cost }\
\text { Inventory,}&\text {  January 1 } & 10,000 & \$ 9.20 \
\text { Purchases: } & \text { June } 18 & 9,000 & 8.00 \
&\text { November 8 } & 6,000 & 7.25
\end{array}$

A physical inventory on December 31 shows 3000 units on hand. Henri sells the units for $12 each. The company has an effective tax rate of 20%. Henri uses the periodic inventory method. What is the cost of goods available for sale?
A) $170700
B) $178500
C) $207500
D) $300000

Quizplus · Accepted Answer

COGS = Beginning Inventory + Purchases - Ending Inventory 
Cost of Goods Available for Sale = $205,000 (Given)

To calculate COGS, we need to find the beginning inventory and purchases: 
Beginning Inventory = $65,000 (Given) 
Purchases = $140,000 ($205,000 - $65,000)

Now we need to determine the ending inventory: 
Ending Inventory (per physical count) = 3000 units

Using the weighted average cost method, the cost per unit is: 
Cost per unit = [(1000 units x $5) + (2000 units x $7)] / 3000 units 
Cost per unit = $6

Ending Inventory (cost) = 3000 units x $6 = $18,000

Therefore, COGS = $65,000 + $140,000 - $18,000 = $187,000

Net Income = Revenue - COGS 
Revenue = 3000 units x $12 = $36,000 
Net Income = $36,000 - $187,000 = -$151,000

Tax = Net Income x Tax Rate 
Tax = -$151,000 x 20% = -$30,200

After deducting taxes from net income, the company has a net loss of $121,800.

Therefore, the cost of goods available for sale is $207,500 (option C).

Henri Company's Inventory Records Show the Following Data A Physical Inventory on December 31 Shows 3000 Units on Units