Modern Day Appliances, Inc. is a wholesaler of kitchen appliances. The company uses a periodic inventory system and the LIFO cost method. Modern Day's December 31, 2009, fiscal year-end inventory of its main product, double-door, stainless steel refrigerators, consisted of the following (listed in chronological order of acquisition):
The replacement cost of the refrigerators throughout 2010 was $900. Modern Day sold 5,000 of these refrigerators during 2010. The company's selling price throughout 2010 was $1,200.
Required:
1. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2010 assuming that Modern Day purchased 5,200 units during the year.
2. Repeat requirement 1 assuming that Modern Day purchased only 4,500 units.
3. For requirements 1 and 2, what amount of before-tax LIFO liquidation profit or loss would Modern Day report in its 2010 disclosure notes, if any, assuming any calculated amount is material?
$$\begin{array} { l c }
\text { Units } & \text { Unit cost } \
\hline 100 & \$ 750 \
200 & 800 \
300 & 850
\end{array}$$

Question

Modern Day Appliances, Inc. is a wholesaler of kitchen appliances. The company uses a periodic inventory system and the LIFO cost method. Modern Day's December 31, 2009, fiscal year-end inventory of its main product, double-door, stainless steel refrigerators, consisted of the following (listed in chronological order of acquisition):
The replacement cost of the refrigerators throughout 2010 was $900. Modern Day sold 5,000 of these refrigerators during 2010. The company's selling price throughout 2010 was $1,200.
Required:
1. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2010 assuming that Modern Day purchased 5,200 units during the year.
2. Repeat requirement 1 assuming that Modern Day purchased only 4,500 units.
3. For requirements 1 and 2, what amount of before-tax LIFO liquidation profit or loss would Modern Day report in its 2010 disclosure notes, if any, assuming any calculated amount is material?
 $$\begin{array} { l c } 
\text { Units } & \text { Unit cost } \
\hline 100 & \$ 750 \
200 & 800 \
300 & 850
\end{array}$$

Quizplus · Accepted Answer

The Answer of Modern Day Appliances, Inc. is a wholesaler of kitchen appliances. The company uses a periodic inventory system and the LIFO cost method. Modern Day's December 31, 2009, fiscal year-end inventory of its main product, double-door, stainless steel refrigerators, consisted of the following (listed in chronological order of acquisition):
The replacement cost of the refrigerators throughout 2010 was $900. Modern Day sold 5,000 of these refrigerators during 2010. The company's selling price throughout 2010 was $1,200.
Required:
1. Compute the gross profit (sales minus cost of goods sold) and the gross profit ratio for 2010 assuming that Modern Day purchased 5,200 units during the year.
2. Repeat requirement 1 assuming that Modern Day purchased only 4,500 units.
3. For requirements 1 and 2, what amount of before-tax LIFO liquidation profit or loss would Modern Day report in its 2010 disclosure notes, if any, assuming any calculated amount is material?
 $$\begin{array} { l c } 
\text { Units } & \text { Unit cost } \
\hline 100 & \$ 750 \
200 & 800 \
300 & 850
\end{array}$$

Modern Day Appliances, Inc Units Unit cost 100$750200800300850\begin{array} { l c } \text { Units } & \text { Unit cost } \\\hline 100 & \$ 750 \\200 & 800 \\300 & 850\end{array} Units 100200300​ Unit cost $750800850​​

Modern Day Appliances, Inc $\begin{array} { l c } \text { Units } & \text { Unit cost } \\\hline 100 & \$ 750 \\200 & 800 \\300 & 850\end{array}$