Question

Nu Company reported the following pretax data for its first year of operations.

Net sales 2,800 Cost of goods available for sale 2,500

Operating expenses 880

Effective tax rate 40%

Ending inventories:

If LIFO is elected 820

If FIFO is elected 1,060

What is Nu's net income if it elects FIFO?

a. $480.

b. $288.

c. $1,360.

d. $144.

Answer 1

Net Sales	$         2,800
Less:
Cost of goods sold	$         1,440
($2500-1060)
Operating Expenses	$             880
Income Before tax	$             480
Less:
Tax at 40%	$             192
Net Income	$             288
Correct Answer =b. $288.