In 2010 the Moncrief Company purchased from Jim Lester the right to be the sole distributor in the western states of a product called Zelenex. In payment, Moncrief agreed to pay Lester 20% of the gross profit recognized from the sale of Zelenex in 2011.

If Moncrief purchases the additional units at year end under a periodic LIFO inventory system, Moncrief reduces Jim Lester's payment by $40,000 ($210,000