Johnson Corporation began the year with inventory of 28,000 units of its only product. The units cost $8 each. The company uses a perpetual inventory system and the FIFO cost method. The following transactions occurred during the year:

A. Purchased 140,000 additional units at a cost of $10 per unit. Terms of the purchases were 1/10, n/30, and 100% of the purchases were paid for within the 10-day discount period. The company uses the gross method to record purchase discounts. The merchandise was purchased f. o.b. shipping point and freight charges of $0.60 per unit were paid by Johnson.
B. 2,800 units purchased during the year were returned to suppliers for credit. Johnson was also given credit for the freight charges of $0.60 per unit it had paid on the original purchase. The units were defective and were returned two days after they were received.
C. Sales for the year totaled 135,000 units at $17 per unit.
D. On December 28, Johnson purchased 6,800 additional units at $10 each.
E. The goods were shipped f. o.b. destination and arrived at Johnson’s warehouse on January 4 of the following year. 30,200 units were on hand at the end of the year.

Required: 1)Determine ending inventory and cost of goods sold at the end of the year. 2)Assuming that operating expenses other than those indicated in the above transactions amounted to $186,000, determine income before income taxes for the year. 3)For financial reporting purposes, the company uses LIFO (amounts based on a periodic inventory system). Record the year-end adjusting entry for the LIFO reserve, assuming the balance in the LIFO reserve at the beginning of the year is $18,600. 4)Determine the amount the company would report as income before taxes for the year under LIFO. Operating expenses other than those indicated in the above transactions amounted to $186,000.

1)Determine ending inventory and cost of goods sold at the end of the year.

Ending Inventory is (30,200×$10.60) = $320,120

Cost of Goods Sold is ((28,000×$8)+(107000×$10.60)) = $ 1,358,200

2)Income before income taxes for the year.

Sales(135000×17)                                                    $2,295,000

Less Cost of Goods Sold                                        $ 1,358,200

Gross Profit                                                              $  963,800

Less Operating Expenses                                        $186,000

Net Income before Taxes                                        $750,800

3) Adjusting entry for the LIFO reserve

Beginning FIFO Reserve     $ 18,600

Add Realisation to LIFO       $22,400

Ending LIFO Reserve            $41,000

4) Income before income taxes for the year.

Sales(135000×17)                                                    $2,295,000

Less Cost of Goods Sold                                        $ 1,431,000

Gross Profit                                                              $  864,000

Less Operating Expenses                                        $186,000

Net Income before Taxes                                        $678,000

Explanation:

Part 1 and Part 2

FIFO assumes that Inventory bought in first is the first to be sold

Thus Cost of Goods Sold is ((28,000×$8)+(107000×$10.60)) = $ 1,358,200

And Closing inventory is (30,200×$10.60) = $320,120

Part 3 and Part 4

LIFO assumes that Inventory bought in last is the first to be sold

Thus Cost of Goods Sold is (135000×$10.60) = $ 1431000

And Closing inventory is (28,000×$0.66) + (2,200×$10.60) = $41800

steering wheels are always situated on the left side of the car.

always drive on the right side of the road.

white lines separate lanes of traffic traveling the same direction.

hashed or broken lines means you may change lanes when it is safe.

solid white lines mean stay in your lane.

yellow lines separate traffic moving in opposing directions.

hashed or broken yellow lines mean you can carefully pass, paying attention to oncoming traffic.

never cross a solid yellow line (or double yellow line).

when turning left at an intersection, pass in front of any cars that are turning left from the opposing direction (do not try to pass behind them).

use the left lane to pass other cars traveling your direction.

do not pass in the right lane unless absolutely necessary.

if you are driving in the far left hand lane and someone would like to pass you, move over to the right lane when it is safe to do so and allow them to pass.

you must always yield to pedestrians.

come to a complete stop whenever you see pedestrians trying to cross the street.

never pass a school bus if it has flashing red lights. wait until the lights have stopped.

be aware of bicyclists. often they share the road with cars and are supposed to also follow general traffic laws.

be particularly careful about driving in cities with bike lanes -- always check before turning that a bike is not coming.

it is mandatory to pull over or stop at an intersection to allow an emergency vehicle to pass you if you see one traveling with lights flashing and/or a siren running.

do not overuse your car horn. horns are used almost exclusively for emergency situations or for when you feel unsafe.

explanation: