Question

Use the following information for questions 6 and 7. Wonderland Company imports and sells a product produced in Canada. In the summer of 2019, a natural disaster disrupted production, affecting its supply of product. On January 1, 2019, Wonderland’s beginning inventory records were as follows: Year purchased Quantity (units) Cost per unit Total cost 2017 4,000 $160 $ 640,000 2018 10,000 $220 2,220,000 Total 14,000 $2,860,000 In 2019, Wonderland only purchased 16,000 units, because the cost had increased to $320 per unit. Wonderland sold 18,400 units during 2019 at a price of $392 per unit, which significantly depleted its inventory. Question 6. Assume that Wonderland makes no further purchases during 2019. Wonderland uses the LIFO inventory method. Compute Wonderland’s gross profit for 2019.

Answer 1

Answer:

$1,564,800

Explanation:

Year   Purchased Quantity (Units)   Cost per unit   Total Cost

2017                 4,000                              $160               $640,000

2018               10,000                              $220            $2,220,000

2019               16,000                               $320           $5,120,000

(A) Sales Revenue

2019              18,400                                $392                       $7,212,800

(B) Less: Cost of Goods Sold (LIFO)

2019              (16,000 x $320)                        ($5,120,000)

2018              {(18,400 - 16,000) x $220}          ($528,000)

(A - B)Gross Profit                                                                      $1,564,800