Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Johnson Corporation began the year with inventory of 19,000 units of its only product. The units cost $7 each. The company uses a perpetual inventory

image text in transcribed

Johnson Corporation began the year with inventory of 19,000 units of its only product. The units cost $7 each. The company uses a perpetual inventory system and the FIFO cost method. The following transactions occurred during the year: a. Purchased 95,000 additional units at a cost of $10 per unit. Terms of the purchases were 3/10, 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 $0.50 per unit were paid by Johnson. b. 1,900 units purchased during the year were returned to suppliers for credit. Johnson was also given credit for the freight charges of $0.50 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 90,000 units at $16 per unit. d. On December 28, Johnson purchased 5,900 additional units at $12 each. The goods were shipped f.o.b. destination and arrived at Johnson's warehouse on January 4 of the following year. e. 22,100 units were on hand at the end of the year. Required: 1. Determine ending inventory and cost of goods sold at the end of the year. 2. Assuming that operating expenses other than those indicated in the above transactions amounted to $168,000, determine income before income taxes for the year. 3. For financial reporting purposes, the company uses LIFO (amounts based on a periodic inventory system). Record the year-end adjusting entry for the LIFO reserve, assuming the balance in the LIFO reserve at the beginning of the year is $16,800. 4. Determine the amount the company would report as income before taxes for the year under LIFO. Operating expenses other than those indicated in the above transactions amounted to $168,000

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

Intermediate Accounting

Authors: Fred Skousen, James Stice, Earl Kay Stice

14th Edition

0324013078, 9780324013078

More Books

Students also viewed these Accounting questions

Question

How is unearned income recorded when it is received?

Answered: 1 week ago

Question

write about your research methods.

Answered: 1 week ago