The Divine Merchandising Corporation began March operations with merchandise inv

Question

The Divine Merchandising Corporation began March operations with merchandise inventory of 6 units, each of which cost $27. During March, Divine Merchandising made the following purchases: (1) March 4, 12 units @ $28 per unit, (2) March 15, 18 units @ $30 per unit, (3) March 26, 14 units @ $32 per unit. During March the Divine Merchandising Company sold the following units at a sales price of $48 per unit: March 6, 11 units, March 20, 17 units, and March 28, 12 units. Operating expenses in March were $640. The Company estimates its income taxes expense will be approximately 35% of income before taxes.

Using the LIFO perpetual inventory method, determine the income taxes expense for March. Round your answer to the nearest whole dollar.

$718

$1,920

$78

$27

$51

a.

$718

b.

$1,920

c.

$78

d.

$27

e.

$51

Explanation / Answer

Solution:

Sale on March 6 Sales on March 20 Sale on March 28 Total 11 units 17 units 12 units 40 Sales revenue 528 816 576 1920 Less: cost of Goods sold 308 510 384 1202 Less: operating Expenses 640 Total cost 1842 Net income 78 Tax expense - 35% 27 The answer to the above question is d. 27 Woking cost of goods sold 11 units * $ 28 17 units * $ 30 12 units * $ 32

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