Cyclone Co. uses the periodic inventory system. The following information about

Question

Cyclone Co. uses the periodic inventory system. The following information about their inventory of Model XX Mountain Bicycles is available:

1/1 Beg Inventory 50 $800
4/12 Purchase 80 $820
7/8 Purchase 75 $840
9/22 Purchase 90 $850

During the year, 235 bicycles were sold at a price of $1500 each. Other operating costs equaled $80,000 and their tax rate is 30%. round the final answer to the nearest dollar

What was ending inventory and cost of goods sold on 12/31 under the FIFO cost flow assumption.

a 51,000 and 194, 100
b 48,200 and 196, 900
c 49, 851 and 195,249
d None

Note... I am confused about the 30% tax rate and the $80,000 additional costs.

Explanation / Answer

You don't need to be because taxes and additional costs aren't relevant to the question asked (they would be if you were computing net profit, perhaps there is another question that asks about profit). Under FIFO we assume the first goods we received were the ones that sold so the ending inventory (60) will be priced at $850 for a total of 51,000. All the other inventory costs go to cost of goods sold so the answer is (a).

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