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question bettencourt clothing corporation uses a periodic inventory system and the l 4280978

Question

Bettencourt Clothing Corporation uses a periodic inventory system and the LIFO cost method. The company began 2016 with the following inventory layers (listed in chronological order of acquisition):

 

5,000 units @ $10

$50,000

8,000 units @ $12

96,000

Beginning inventory

$146,000

 

During 2016, 20,000 units were purchased for $15 per unit. Sales for the year totaled 30,000 units at various prices, leaving 3,000 units in ending inventory.

Required:

1. Calculate cost of goods sold for 2016.

2. Determine the amount of LIFO liquidation profit that the company must report in a disclosure note to its 2016 financial statements, assuming the amount is material. Assume an income tax rate of 40%.

 

Bettencourt Clothing Corporation uses a periodic inventory system and the LIFO cost method. The company began 2016 with the following inventory layers (listed in chronological order of acquisition):

 

5,000 units @ $10

$50,000

8,000 units @ $12

96,000

Beginning inventory

$146,000

 

During 2016, 20,000 units were purchased for $15 per unit. Sales for the year totaled 30,000 units at various prices, leaving 3,000 units in ending inventory.

Required:

1. Calculate cost of goods sold for 2016.

2. Determine the amount of LIFO liquidation profit that the company must report in a disclosure note to its 2016 financial statements, assuming the amount is material. Assume an income tax rate of 40%.

 

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