The Churchill Corporation uses a periodic inventory system and the LIFO inventor
ID: 2444464 • Letter: T
Question
The Churchill Corporation uses a periodic inventory system and the LIFO inventory cost method for its one product. Beginning inventory of 21,000 units consisted of the following, listed in chronological order of acquisition:
During 2016, inventory quantity declined by 11,000 units. All units purchased during 2016 cost $10.00 per unit.
Calculate the before-tax LIFO liquidation profit or loss that the company would report in a disclosure note assuming the amount determined is material.
LIFO Liquidation Profit = ____________
12,500 units at a cost of $6.00 per unit = $75,000 8,500 units at a cost of $7.00 per unit = 59,500Explanation / Answer
In 2o16 , sales were more than purchase by 11000 units So 11000 units consumed from beginning stock causing LIFO liquidation Beginning Inventory sold in 2016 as per LIFO Layer Units Liquidated Old rate $ Current Replacement $cost/unit LIFO liquidation calculation LIFO liquidation effect on earning $ 2 8500 7 10 =8500(10-7) 25,500 1 2500 6 10 =2500(10-6) 10,000 Total pretax increase in Profit due to LIFO liquidation $ 35,500.00