3a. Castillo Corporation has maintained a periodic inventory system and used the LIFO costflow alternative for years. The earliest layers of LIFO inventory date back 15 years. Thecompany had beginning inventory at January 1, 2021, consisting of three layers, starting withthe oldest layer of 150,000 units.UNITSUNIT COSTTOTAL COST$10$1,500,000960,000150,00080,0001215,00020300,000245,000$2.760,000During the year, an involuntary reduction of inventory occurred. Ending inventory dropped to120,000 units. The current replacement value of those units is $35 per unit. The appropriate taxrate is 27%.3a. Provide two examples of possible involuntary reductions of inventory. Provide twoexamples of voluntary reductions of inventory.3b. Determine the after-tax change in income. Show labelled work.3c. What needs to be disclosed in the notes and why?On January 1, 2018, Toups Inc. changed from FIFO to LIFO for income tax and externalreporting purposes. At that date, the beginning FIFO inventory was $75,000. See the followinginformation from Toups's records.Ending Inventory at FIFO$ 75,00088,000100,00075,00088,000YearIndex20181.0020191.1020201.1520211.2020221.253d. Prepare a table similar to the notes to show how you arrived at ending inventory at dollarvalue LIFO.3e. Write the necessary adjusting entries to adjust the LIFO Reserve for each year.

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Description: 3a. Castillo Corporation has maintained a periodic inventory system and used the LIFO costflow alternative for years. The earliest layers of LIFO inventory date back 15 years. Thecompany had beginning inventory at January 1, 2021, consisting of thre

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. Castillo Corporation has maintained a periodic inventory system and used the LI w alternative for years. The earliest layers of LIFO inventory date back 15 years. mpany had beginning inventory at January 1, 2021, consisting of three layers, sta e oldest layer of 150,000 units. NITS 150,000 80,000 15,000 245.000 UNIT COST $10 12 20 TOTAL COST $1,500,000 960,000 300,000 $2.760,000 ring the year, an involuntary reduction of inventory occurred. Ending inventory dr 0.000 units. The current replacement value of those units is $35 per unit. The ann

. Castillo Corporation has maintained a periodic inventory system and used the LI w alternative for years. The earliest layers of LIFO inventory date back 15 years. mpany had beginning inventory at January 1, 2021, consisting of three layers, sta e oldest layer of 150,000 units. NITS 150,000 80,000 15,000 245.000 UNIT COST $10 12 20 TOTAL COST $1,500,000 960,000 300,000 $2.760,000 ring the year, an involuntary reduction of inventory occurred. Ending inventory dr 0.000 units. The current replacement value of those units is $35 per unit. The ann

FINANCIAL ACCOUNTING

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Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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13. Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception of the company in 1979. In 2021, the company decided to switch to the average cost method. Data for 2021 are as follows: Beginning inventory, FIFO (5,000 units @ $26) $ 130,000 Purchases: 5,000 units @ $31 $ 155,000 5,000 units @ $35 175,000 330,000 Cost of goods available for sale $ 460,000 Sales for 2021 (5,000 units @ $62) $ 310,000 Additional Information: The company's effective income tax rate is 25% for all years. If the company had used the average cost method prior to 2021, ending inventory for 2020 would have been $120,000. 10,000 units remained in inventory at the end of 2021. Required:1. Ignoring income taxes, prepare the 2021 journal entry to adjust the accounts to reflect the average cost method.2. What is the effect of the change in methods on 2021 net income?
A company purchased 100 units for $30 each on January 31. It purchased 300 units for $20 each on February 28. It sold a total of 370 units for $110 each from March 1 through December 31. If the company uses the last – in, first – out inventory costing method, calculate the cost of ending inventory on December 31. (Assume that the company uses a perpetual inventory system.) A. $900 B. $600 C. $2,400 D. $30
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During the year, Wright Company sells 330 remote-control airplanes for $110 each. The company has the following inventory purchase transactions for the year. DateTransactionNumber of UnitsUnit CostTotal CostJan. 1Beginning inventory 60 $73 $4,380 May. 5Purchase 205 76 15,580 Nov. 3Purchase 110 81 8,910 375 $28,870 Calculate ending inventory and cost of goods sold for the year, assuming the company uses LIFO.
7. Taylor Corporation reports inventory and cost of goods sold based on calculations from a LIFO periodic inventory system. The company’s records under this system reveal the following inventory layers at the beginning of 2021 (listed in chronological order of acquisition): 17,500 units @ $15 $ 262,500 22,500 units @ $20 450,000 Beginning inventory $ 712,500 During 2021, 45,000 units were purchased for $25 per unit. Due to unexpected demand for the company's product, 2021 sales totaled 55,000 units at various prices, leaving 30,000 units in ending inventory. Required:1. Calculate the amount to report for cost of goods sold for 2021.2. Determine the amount of LIFO liquidation profit that the company must report in a disclosure note to its 2021 financial statements. Assume an income tax rate of 25%.3. If the company decided to purchase an additional 10,000 units at $25 per unit at the end of the year, how much income tax currently payable would be saved?
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