3-1. The inventory footnote to the 20X5 annual report of the Ruedy Company reads in part as follows: Because of a prolonged strike in one of our supplier's plants, inventories were unavoidably reduced during 20X5. Under the LIFO system of accounting, this "eating into LIFO layers" resulted in an after-tax net income of $36,000 over what it would have been had inventories been maintained at their physical levels that existed at the start of the year. The price of Ruedy Company's merchandise purchases was $22 per unit for 20,000 units during 20X5. Prior to 20X5, inventory prices had risen steadily for many years. The company's inventory positions at the beginning and end of the year are summarized below. Ruedy's income tax rate is 40%. Physical Count of Inventory 30,000 units Date LIFO Cost of Inventory January 1, 20X5 December 31, 20X5 $? 20,000 units $260,000 Required: a. Was 20X5 cost of goods sold higher or lower as a result of the LIFO liquidation? By how much? Were 20X5 income taxes higher or lower as a result of "eating into LIFO layers"? By how much? b. What was the average cost per unit of the 10,000 units removed from the January 1, 20X5 LIFO inventory? c. What was the January 1, 20X5 LIFO cost of inventory? d. What was the reported 20X5 cost of goods sold for Ruedy Company? 3-1. The inventory footnote to the 20X5 annual report of the Ruedy Company reads in part as follows: Because of a prolonged strike in one of our supplier's plants, inventories were unavoidably reduced during 20X5. Under the LIFO system of accounting, this "eating into LIFO layers" resulted in an after-tax net income of $36,000 over what it would have been had inventories been maintained at their physical levels that existed at the start of the year. The price of Ruedy Company's merchandise purchases was $22 per unit for 20,000 units during 20X5. Prior to 20X5, inventory prices had risen steadily for many years. The company's inventory positions at the beginning and end of the year are summarized below. Ruedy's income tax rate is 40%. Physical Count of Inventory 30,000 units Date LIFO Cost of Inventory January 1, 20X5 December 31, 20X5 $? 20,000 units $260,000 Required: a. Was 20X5 cost of goods sold higher or lower as a result of the LIFO liquidation? By how much? Were 20X5 income taxes higher or lower as a result of "eating into LIFO layers"? By how much? b. What was the average cost per unit of the 10,000 units removed from the January 1, 20X5 LIFO inventory? c. What was the January 1, 20X5 LIFO cost of inventory? d. What was the reported 20X5 cost of goods sold for Ruedy Company? 3-1. The inventory footnote to the 20X5 annual report of the Ruedy Company reads in part as follows: Because of a prolonged strike in one of our supplier's plants, inventories were unavoidably reduced during 20X5. Under the LIFO system of accounting, this "eating into LIFO layers" resulted in an after-tax net income of $36,000 over what it would have been had inventories been maintained at their physical levels that existed at the start of the year. The price of Ruedy Company's merchandise purchases was $22 per unit for 20,000 units during 20X5. Prior to 20X5, inventory prices had risen steadily for many years. The company's inventory positions at the beginning and end of the year are summarized below. Ruedy's income tax rate is 40%. Physical Count of Inventory 30,000 units Date LIFO Cost of Inventory January 1, 20X5 December 31, 20X5 $? 20,000 units $260,000 Required: a. Was 20X5 cost of goods sold higher or lower as a result of the LIFO liquidation? By how much? Were 20X5 income taxes higher or lower as a result of "eating into LIFO layers"? By how much? b. What was the average cost per unit of the 10,000 units removed from the January 1, 20X5 LIFO inventory? c. What was the January 1, 20X5 LIFO cost of inventory? d. What was the reported 20X5 cost of goods sold for Ruedy Company?