Inventory Valuation and Earnings.Dominick Portet Wines Inc. began operations to import fine wines from Australia to the United States. Sales and purchase information is provided below. Year 1Year 2Year 3 Units $Units $Units $Sales340 440 600 Purchases500@$10400@$8?@15LIFO ending inventory160@$10120@$10 Assume that Portet Wines uses the LIFO method of inventory valuation. The purchase amount for Year 3 has been left blank because Portet Wines has not yet decided the total number of units to purchase during the year. (Assume that all sales occur on the last day of the year, after all purchases for the year have been made. The company's year-end is December 31.)RequiredHow many units should be purchased in Year 3 if the firm's objective is to maximize reported income for the year? AnswerCompute the cost of goods sold for Year 3 assuming the number of units computed in (1) is purchased. $AnswerHow many units should be purchased in Year 3 if the firm's objective is to minimize income taxes for the year? AnswerCompute the cost of goods sold for Year 3 assuming the number of units computed in (3) is purchased. $AnswerAssume Portet Wines uses FIFO instead of LIFO and the company purchased just enough units to meet sales demand. What would the cost of goods sold be in Year 3?Assume that FIFO ending inventory is equal to 160 units at $10 in Year 1 and 120 units at $8 in Year 2. $AnswerPreviousSave AnswersNext

Name: Inventory Valuation and Earnings.Dominick Portet Wines Inc. began oper
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Description: Inventory Valuation and Earnings.Dominick Portet Wines Inc. began operations to import fine wines from Australia to the United States. Sales and purchase information is provided below. Year 1Year 2Year 3 Units $Units $Units $Sales340 440 600 Purch

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Inventory Valuation and Earnings.
Dominick Portet Wines Inc. began operations to import fine wines from Australia to the United States. Sales and purchase information is provided below.

	Year 1	Year 2	Year 3
	Units		$	Units		$	Units		$
Sales	340			440			600
Purchases	500	@	$10	400	@	$8	?	@	15
LIFO ending inventory	160	@	$10	120	@	$10

Assume that Portet Wines uses the LIFO method of inventory valuation. The purchase amount for Year 3 has been left blank because Portet Wines has not yet decided the total number of units to purchase during the year. (Assume that all sales occur on the last day of the year, after all purchases for the year have been made. The company's year-end is December 31.)

Required

How many units should be purchased in Year 3 if the firm's objective is to maximize reported income for the year?

Answer
Compute the cost of goods sold for Year 3 assuming the number of units computed in (1) is purchased.

$Answer
How many units should be purchased in Year 3 if the firm's objective is to minimize income taxes for the year?

Answer
Compute the cost of goods sold for Year 3 assuming the number of units computed in (3) is purchased.

$Answer
Assume Portet Wines uses FIFO instead of LIFO and the company purchased just enough units to meet sales demand. What would the cost of goods sold be in Year 3?

Assume that FIFO ending inventory is equal to 160 units at $10 in Year 1 and 120 units at $8 in Year 2.

$Answer

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