Question

The Foxworthy Corporation uses a periodic inventory system and the LIFO inventory cost method for its one product. Beginning inventory of 40,000 units consisted of the following, listed in chronological order of acquisition: 24,000 units at a cost of $6.00 per unit 16,808 units at a cost of $7.00 per unit $144,000 112,000 During 2018, inventory quantity declined by 18,000 units. All units purchased during 2018 cost $8.00 per unit. Required Calculate the before-tax LIFO liquidation profit or loss that the company would report in a disclosure note assuming the amount determined is material

Answer 1

Answer:

$19,192

Explanation:

Foxworthy Corporation before-tax profit/loss using LIFO method will be;

24000 units * $6.00 per unit = $144,000

16808 units * $7.00 per unit = $117,656

In 2018 the inventory quantity declined by 18000 units.

The cost of 18,000 units will be 18,000 * $8.00 per unit = $144,000

16,808 units * $7.00 per unit = $117,656

18,000 units - 16,808 units = 1,192 units

1,192 units * $6.00 per unit = $7,152

Profit/ Loss due to inventory decline :

$144,000 - $117,656 - $7,152 = $19,192.