Complete Question:
The ending inventory includes 15,841 units purchased at $4 each. The current market price is $3.00
Answer:
Jaffa Company
Income Statement, reflecting the lower of cost or net realizable value:
Sales revenue $294,000
Cost of goods sold
Beginning inventory $34,400
Purchases 198,000
Goods available for sale 232,400
Ending inventory (FIFO cost) 47,523
Cost of goods sold 184,877
Gross profit 109,123
Operating expenses 63,400
Pretax income 45,723
Income tax expense (40%) 18,289
Net income $27,434
Explanation:
a) Data and Calculations:
Ending inventory at LCNRV = 15,841 * $3.00 = $47,523
Sales revenue $294,000
Cost of goods sold
Beginning inventory $34,400
Purchases 198,000
Goods available for sale 232,400
Ending inventory (FIFO cost) 63,364
Cost of goods sold 169,036
Gross profit 124,964
Operating expenses 63,400
Pretax income 61,564
Income tax expense (40%) 24,626
Net income $36,938
