Question

8. Fulbright Corp. uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition):

41 units at $96

71 units at $85

171 units at $63

Sales for the year totaled 269 units, leaving 14 units on hand at the end of the year.

Ending inventory using the LIFO method is:

Multiple Choice

a. $932.

b. $1,344.

c. $882.

d. $1,026.

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

Net sales		2,840
Cost of goods available for sale		2,440
Operating expenses		810
Effective tax rate		40	%
Ending inventories:
If LIFO is elected		960
If FIFO is elected		1,160

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

Multiple Choice

a. $330.

b. $450.

c. $750.

d. $1,560.

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

Net sales		2,800
Cost of goods available for sale		2,410
Operating expenses		720
Effective tax rate		30	%
Ending inventories:
If LIFO is elected		950
If FIFO is elected		1,210

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

Multiple Choice

a. $880.

b. $434.

c. $620.

d. $616.

Answer 1

1-	Ending inventory at LIFo	Units in year end Inventory*Unit price	14*96	1344
2-	net sales		2840
	less cost of goods sold = value of goods available-year end inventory using FIFO	2440-1160	1280
	gross profit		1560
	operating expense		810
	before tax profit		750
	tax -40%		300
	after tax profit		450
3-	net sales		2800
	less cost of goods sold = value of goods available-year end inventory using FIFO	2410-950	1460
	gross profit		1340
	operating expense		720
	before tax profit		620
	tax -30%		186
	after tax profit		434