Question

A physical inventory on December 31 shows 4,000 units on hand. Eneri sells the units for $13 each. The company has an effective tax rate of 20%. Eneri uses the periodic inventory method. If the company uses FIFO, what is the gross profit for the period?

Answer 1

Gross profit is $42,000

Step-by-step explanation:

Answer 2

$52,000

Explanation:

Remember, the FIFO inventory costing method records the inventory value based on the cost of the earliest (first) purchased or in hand balance.

The effective tax rate would usually be applied after the sales, however using FIFO we assume the first value of the inventory prior to the tax deduction.

= 4000 x $13

= $52,000

Therefore, the gross profit for the period is $52,000.