Question

The Churchill Corporation uses a periodic inventory system and the LIFO inventory cost method for its one prod-uct. Beginning inventory of 20,000 units consisted of the following, listed in chronological order of acquisition:
12,000 units at a cost of $8.00 per unit = $96,000
8,000 units at a cost of $9.00 per unit = 72,000
During 2016, inventory quantity declined by 10,000 units. All units purchased during 2016 cost $12.00 per unit.
Required: Calculate the before-tax LIFO liquidation profit or loss that the company would report in a disclosure note, assum-ing the amount determined is material.

Answer 1

Answer:

$32,000

Explanation:

Calculation to determine the before-tax LIFO liquidation profit or loss that the company would report

Before-tax LIFO liquidation profit =8,000 Units × ($12.00 per unit – $9.00 per unit) + (12,000 units-10,000units)× ($12.00 per unit – $8 per unit)

Before-tax LIFO liquidation profit =(8,000 units× $3 per unit)+(2,000 units ×$4 per unit)

Before-tax LIFO liquidation profit =$24,000+$8,000

Before-tax LIFO liquidation profit =$32,000

Therefore the before-tax LIFO liquidation profit or loss that the company would report in a disclosure note will be $32,000