Assignment Task:
Jillet Corporation began the year with inventory of 30,000 units of its only product. The units cost $8 each. The company uses a perpetual inventory system and the FIFO cost method. The following transactions occurred during the year: Purchased 150,000 additional units at a cost of $10 per unit. Terms of the purchases were 2/10, n/30. The company uses the gross method to record purchase discounts. The inventory was purchased f.o.b. shipping point and additional freight costs of $0.50 per unit were charged to Jillet. 3,000 units purchased during the year were returned to suppliers for credit. Jillet was also given credit for the freight charges of $0.50 per unit on the original purchase. The units were defective and were returned two days after they were received. The remaining inventory was paid within the discount period. (Hint: The discount applies only to inventory and not the freight.) Sales for the year totaled 145,000 units at $18 per unit. (Hint: The cost of the inventory sold includes the purchase cost of those units plus freight less purchase discount.) On December 28, Jillet purchased 7,000 additional units at $10 each. The goods were shipped f.o.b. destination and arrived at Jillet's warehouse on January 4 of the following year. 32,000 units were on hand at the end of the year. Required: Determine ending inventory and cost of goods sold at the end of the year. Assuming that operating expenses other than those indicated in the above transactions amounted to $190,000, determine income before income taxes for the year. For financial reporting purposes, the company uses LIFO (amounts based on a periodic inventory system). Record the year-end adjusting entry for the LIFO reserve, assuming the balance in the LIFO reserve at the beginning of the year is $19,000. Determine the amount the company would report as income before taxes for the year under LIFO. Operating expenses other than those indicated in the above transactions amounted to $190,000.