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hodyreva [135]
3 years ago
11

Nu Company reported the following pretax data for its first year of operations. Net sales 2,910 Cost of goods available for sale

2,430 Operating expenses 730 Effective tax rate 30% Ending inventories: If LIFO is elected 870 If FIFO is elected 1,230 What is Nu's net income if it elects LIFO?
Business
2 answers:
guapka [62]3 years ago
6 0

Answer:

Ending inventory is $464

Explanation:

The question is to determine Nu Company's net income based on the Last In First Out (LIFO) method of stock valuation.

Step 1: It should be noted that the cost of goods available for sale is usually the total of opening inventory and purchases of inventory.

Since, the cost of goods available is already given in the question, then Cost of Goods Sold which is required for gross profit or income will be obtained as follows:

Step 2: Cost of Goods Sold= Cost of Goods available - Closing Inventory

At LIFO method, then closing inventory will be $870

Therefore, Cost of Goods Sold = $2,430 - $870= $1,560

Step 3: Now the Net Income can be calculated (Net Income before Tax)

= Net sales - COGS (calculated in step 2)- Operating expenses

$2,910- $1,560-$730

= $620

Step 4: Calculate the Net income after tax

= Net Income before taxation * (1 - given tax rate); tax rate is 30%

= $620 x (70%)

=$620 *0.70

= $464

kozerog [31]3 years ago
5 0

Answer:

$434

Explanation:

Net sales                     = $2,910

-Cost of goods sold    = $1,560 (Working)

=Gross profit                = $1350

-Operating expenses  = $730

=Profit before Tax        = $620

-Tax 30%                      = $186

=Net Profit/Net Income= $434

<u>Working</u>

Cost of goods sold = Cost of goods available for sale - Closing Inventory if LIFO is elected

Cost of goods sold = 2,430 - 870 = 1560

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