5. Checkers uses the periodic inventory inventory system. For the current month,

Question

5. Checkers uses the periodic inventory inventory system. For the current month, the beginning For the ory consisted of 480 units that cost $65 each. During the month, the company Two purchases: 720 units at $68 each and 360 units at $70 each. Checkers sold units for $100 each during the month. Using the LIFO method, what is the amount of gross profit for the month? a $81,048 b $38,040 c· $81,960 d. $80,160 e. $38,952 XYZ Company was formed on 1/1/14. Over a two-year period, XYZ's inventory costs steadily increased. At December 31, 2014, XVZ held inventory equal to two months' sales. At December 31, 2015, xyZ's ending inventory was zero. Which cost method will have the highest inventory cost at December 31, 20142 a. FIFO b. LIFO c. Average d. No difference 6· 7. Refer to question 6 above. Which cost method will have the highest net income for 2015? a. FIFO b. LIFO c. Average d. No difference ry value and the inventory amount used for 8. What is a LIFO reserve? a. The difference between the LIFO invento internal reporting purposes b. The tax C. d. The e. savings attributed to using the LIFO method. e current effect of using LIFO on net income. change in the LIFO inventory during the year An account established to offset the effect of liquidation of LIFO layers

Explanation / Answer

5. Answer: Option b. $38040

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No. of Units Unit
Price $ Total $ Inventory, Beginning 480 65 31200 Purchases: 1 720 68 48960 2 360 70 25200 Total purchases 1080 74160 Cost of goods available for sale 1560 105360 Sales: 1200 Ending inventory 360

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