Problem 18-63

Grouse Company is a furniture retailer whose average annual gross receipts for the preceding three years exceeded $10 million. In the current tax year, the company purchased merchandise with an invoice price of $15 million, less a 2% discount for early payment. However, the company had to borrow on a bank line of credit and paid $150,000 interest to take advantage of the discount for early payment.Freight on the merchandise purchased totaled $360,000. For September, Grouacse agreed to pay the customers freight on goods sold. The total cost of this freight-out was $70,000.The company has three stores and operates a warehouse where it stores the goods.The cost of operating the warehouse was $240,000. The $240,000 includes labor, depreciation, taxes and insurance on the building. The cost of the purchasing operations totaled $420,000. The jurisdiction where the company operates imposes a tax on inventories on hand as of January 1.The inventory tax for this year was $24,000. The invoice cost of goods on hand at the end of the year is $3 million. Compute Grouses ending inventory using the FIFO method.