Jackson Specialties has been in business for more than 50 years. The company maintains a per-petual inventory system, uses a LIFO flow assumption, and ends its fiscal year at December 31. At year-end, the cost of goods sold and inventory are adjusted to reflect periodic LIFO costingprocedures.A railroad strike has delayed the arrival of purchases ordered during the past several months of2011, and Jackson Specialties has not been able to replenish its inventories as merchandise is sold. At December 22, one product appears in the company’s perpetual inventory records at the follow-ing unit costs: Purchase Date Quantity Unit Cost Total CostNov. 14, 1958 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 $6 $18,000Apr. 12, 1959 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 8 16,000Available for sale at Dec. 22, 2011. . . . . . . . . . . . . . . . 5,000 $34,000 Jackson Specialties has another 8,000 units of this product on order at the current wholesalecost of $30 per unit. Because of the railroad strike, however, these units have not yet arrived (theterms of purchase are F.O.B. destination). Jackson Specialties also has an order from a customerwho wants to purchase 4,000 units of this product at the retail sales price of $47 per unit. JacksonSpecialties intends to make this sale on December 30, regardless of whether the 8,000 units onorder arrive by this date. (The 4,000-unit sale will be shipped by truck, F.O.B. shipping point.)Instructionsa. Are the units in inventory really more than 50 years old? Explain.b. Prepare a schedule showing the sales revenue, cost of goods sold, and gross profit that will resultfrom this sale on December 30, assuming that the 8,000 units currently on order (1) arrive beforeyear-end and (2) do not arrive until some time in the following year. (In each computation, showthe number of units comprising the cost of goods sold and their related per-unit costs.)
Jackson Specialties has been in business for more than 50 years. The company maintains a per-
petual inventory system, uses a LIFO flow assumption, and ends its fiscal year at December 31.
At year-end, the cost of goods sold and inventory are adjusted to reflect periodic LIFO costing
procedures.
A railroad strike has delayed the arrival of purchases ordered during the past several months of
2011, and Jackson Specialties has not been able to replenish its inventories as merchandise is sold.
At December 22, one product appears in the company’s perpetual inventory records at the follow-
ing unit costs:
Purchase Date Quantity Unit Cost Total Cost
Nov. 14, 1958 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 $6 $18,000
Apr. 12, 1959 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 8 16,000
Available for sale at Dec. 22, 2011. . . . . . . . . . . . . . . . 5,000 $34,000
Jackson Specialties has another 8,000 units of this product on order at the current wholesale
cost of $30 per unit. Because of the railroad strike, however, these units have not yet arrived (the
terms of purchase are F.O.B. destination). Jackson Specialties also has an order from a customer
who wants to purchase 4,000 units of this product at the retail sales price of $47 per unit. Jackson
Specialties intends to make this sale on December 30, regardless of whether the 8,000 units on
order arrive by this date. (The 4,000-unit sale will be shipped by truck, F.O.B. shipping point.)
Instructions
a. Are the units in inventory really more than 50 years old? Explain.
b. Prepare a schedule showing the sales revenue, cost of goods sold, and gross profit that will result
from this sale on December 30, assuming that the 8,000 units currently on order (1) arrive before
year-end and (2) do not arrive until some time in the following year. (In each computation, show
the number of units comprising the cost of goods sold and their related per-unit costs.)
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