Johnson Corporation began 2016 with inventory of 17,000 units of its only produc
ID: 2484311 • Letter: J
Question
Johnson Corporation began 2016 with inventory of 17,000 units of its only product. The units cost $9 each. The company uses a periodic inventory system and the LIFO cost method. The following transactions occurred during 2016 a. Purchased 85,000 additional units at a cost of $10 per unit. Terms of the purchases were 2/10, 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 $0.40 per unit were paid by Johnson b. 1,700 units purchased during the year were returned to suppliers for credit. Johnson was also given credit for the freight charges of $0.40 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 80,000 units at $18 per unit. d. On December 28, 2016, Johnson purchased 5,700 additional units at $10 each. The goods were shipped f.o.b. destination and arrived at Johnson's warehouse on January 4, 2017 e. 20,300 units were on hand at the end of 2016Explanation / Answer
Answer:
Ending inventory:
Calculation of 2016 purchases (units):
Ending inventory = 20300
Less: Beg. inventory = 17000
2016 purchases = 3300 units
Calculation of 2016 purchases (cost):
Gross cost (3300*$10) = 33000
Add: freight in (3300*$0.40) = 1320
Less:purchases discount ( 33000*2%)= 660
Net cost of purchase of 3300 units = 33660
Beginning inventory (17000*$9)
153000
2016 purchases
33660
Ending inventory
$186660
Cost of goods sold:
Calculation of 2016 purchases (units):
Gross purchases = 85000 units
Less: purchase return = 1700 units
Net purchases = 83300 units
Calculation of 2016 purchases (cost):
Gross purchases (83300*$10) = 833000
Freight in (83300*$0.40) = 33320
Purchase discounr (833000*2% ) = 16660
Beginning inventory
153000
Net purchases:
Gross cost of purchases
833000
Add: Freight in
33320
Less: Purchases discount
16660
Net purchases
849660
Cost of goods available for sale (Net purchases + beginning inventory)
1002660
Less: ending inventory
186660
Cost of goods sold
816000
Beginning inventory (17000*$9)
153000
2016 purchases
33660
Ending inventory
$186660
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