Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Johnson Corporation began 2016 with inventory of 10,000 units of its only product. The units cost $8 each. The company uses a periodic inventory system

Johnson Corporation began 2016 with inventory of 10,000 units of its only product. The units cost $8 each. The company uses a periodic inventory system and the LIFO cost method. The following transactions occurred during 2016:

a. Purchased 50,000 additional units at a cost of $10 per unit. Terms of the purchases were 2/10, n/30, and 100% of the purchases were paid for within the 10-day discount period. The company uses the gross method to record purchase discounts. The merchandise was purchased f.o.b. shipping point and freight charges of $.50 per unit were paid by Johnson.

b. 1,000 units purchased during the year were returned to suppliers for credit. Johnson was also given credit for the freight charges of $.50 per unit it had paid on the original purchase. The units were defective and were returned two days after they were received.

c. Sales for the year totaled 45,000 units at $18 per unit.

d. On December 28, 2016, Johnson purchased 5,000 additional units at $10 each. The goods were shipped f.o.b. destination and arrived at Johnson's warehouse on January 4, 2017.

e. 14,000 units were on hand at the end of 2016.

Required:

1. Determine ending inventory and cost of goods sold for 2016.

2. Assuming that operating expenses other than those indicated in the above transactions amounted to $150,000, determine income before income taxes for 2016.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing Fundamentals In A South African Context

Authors: Gerrit Penning, Rika Butler, Pieter Von Wielligh, Frans Prinsloo

2nd Edition

0190749040, 978-0190749040

More Books

Students also viewed these Accounting questions

Question

10-9 How have social technologies changed e-commerce?

Answered: 1 week ago