Scoresby Inc. tracks the number of units purchased and sold throughout each year

Question

Scoresby Inc. tracks the number of units purchased and sold throughout each year but applies its inventory costing method at the end of the year, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31 Transactions Unit Cost Units 1,500 a. Inventory, Beginning For the vear: b. Purchase, March 5 c. Purchase, September 19 d. Sale, April 15 (sold for $76 per unit) e. Sale, October 31 (sold for $79 per unit) f. Operating expenses (excluding income tax expense), $398,000 $31 32 34 7,500 3,500 2,200 6,500 Required 1. Calculate the number and cost of goods available for sale 12,500 units Number of Goods Available for Sale Cost of Goods Available for Sale 405,500 2. Calculate the number of units in ending inventory Ending Inventory 3,800 units

Explanation / Answer

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LIFO inventory costing method minimizes income taxes. As can be seen in Part-4, under LIFO methos there is highest Cost of goods sold out of three method and hence lower profit which results in to lower taxes.

Unit Per Unit Total Cost Beginning 1500 31 46500 March 5 Purchase 7500 32 240000 September 9 Purchase 3500 34 119000 april5 Sale 2200 October 31 Sale 6500

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