Mandalay Industries is a private company that sells electronic test equipment. During the year, the inventory records
Question:
To minimize income taxes, inventory is valued at cost using the LIFO inventory method. On December 28, Mandalays supplier increased the unit cost of new test equipment to $ 15,000.
Required:
1. Determine the companys Income from Operations and the cost of ending inventory. The companys operating expenses (excluding Cost of Goods Sold) were $ 300,000 and the company applies LIFO with a periodic inventory system.
2. Mandalays management is considering buying 20 additional units on December 31 at $ 15,000 each. Redo the income statement and ending inventory calculations, assuming that this purchase is made on December 31.
3. How much did Income from Operations change because of the decision to purchase additional units on December 31? Is there any evidence of deliberate income manipulation? Is this tax fraud? Explain.
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...
Step by Step Answer:
Fundamentals of Financial Accounting
ISBN: 978-0078025914
5th edition
Authors: Fred Phillips, Robert Libby, Patricia Libby