Cansela Corporation uses a periodic inventory system and the LIFO method to value its inventory. The company began 2013 with inventory of 7,900 units of its only product. The beginning inventory balance of $112,800 consisted of the following layers:
|
|
|
|
|
| 3,400 units at $12 per unit |
= |
$ |
40,800 |
|
| 4,500 units at $16 per unit |
= |
|
72,000 |
|
|
|
|
|
|
|
|
$ |
112,800
|
|
|
During the three years 2013-2015 the cost of inventory remained constant at $18 per unit. Unit purchases and sales during these years were as follows:
|
Purchases |
Sales |
| 2013 |
|
31,000 |
|
|
33,000 |
|
| 2014 |
|
41,000 |
|
|
43,500 |
|
| 2015 |
|
33,000 |
|
|
34,000 |
|
|
|
|
|
|
Required:
| 1. |
Calculate cost of goods sold for 2013, 2014, and 2015. |
| 2. |
Disregarding income tax, determine the LIFO liquidation profit or loss, if any, for each of the three years.
|
| 3. |
Determine the effects of LIFO liquidation on cost of goods sold and net income for 2013, 2014, and 2015. Cansela's effective income tax rate is 45%.
|