Bettencourt Clothing Corporation uses a periodic inventory system and the LIFO cost method. The company began 2018 with the following inventory layers (listed in chronological order of acquisition):
5,000 units @ $10 $50,000
8,000 units @ $12 96,000
Beginning inventory $146,000
During 2018, 20,000 units were purchased for $15 per unit. Sales for the year totaled 30,000 units at various prices, leaving 3,000 units in ending inventory.
Required:
1. Calculate cost of goods sold for 2018.
2. Determine the amount of LIFO liquidation profit that the company must report in a disclosure note to its 2018 financial statements, assuming the amount is material. Assume an income tax rate of 40%.

Question

Quizplus · Accepted Answer

The Answer of Bettencourt Clothing Corporation uses a periodic inventory system and the LIFO cost method. The company began 2018 with the following inventory layers (listed in chronological order of acquisition):
5,000 units @ $10 $50,000
8,000 units @ $12 96,000
Beginning inventory $146,000
During 2018, 20,000 units were purchased for $15 per unit. Sales for the year totaled 30,000 units at various prices, leaving 3,000 units in ending inventory.
Required:
1. Calculate cost of goods sold for 2018.
2. Determine the amount of LIFO liquidation profit that the company must report in a disclosure note to its 2018 financial statements, assuming the amount is material. Assume an income tax rate of 40%.

Bettencourt Clothing Corporation Uses a Periodic Inventory System and the LIFO