Ruhe Auto Supplies began operations in 2004. The company€™s inventory purchases and sales in the first and subsequent years of operations are as follows:

The company€™s federal income tax rate is 30 percent and the inventory at December 31, 2016 was $112,500. For the year ended December 31, 2017, Ruhe Auto Supplies generated $3,000,000 in revenues and incurred $800,000 in expenses (exclusive of cost of goods sold). Ruhe Auto Supplies uses the LIFO cost fl ow assumption to account for inventory.

REQUIRED:
a. Compute ending inventory as of December 31, 2017. Identify the number of units in ending inventory and the costs attached to each unit.
b. Compute the company€™s 2017 income tax liability and net income after taxes for the year ended December 31, 2017.
c. Assume that Ruhe Auto Supplies was able to purchase an additional 10,500 units of inventory on
December 31, 2017 for $95 per unit. Would you advise the company to purchase these additional units? Explain your answer.

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Cost per Unit Year Units Purchased Units Sold $ 5 2004 20,000 4,000 2005 8,000 10 8,000 7,000 2006 15 9,000 2007 8,500 20 7,000 7,500 25 2008 6,000 7,000 2009 7,500 30 50 8,000 2010 9,000 65 2011 8,000 9,000 2012 9,500 70 9,000 2013 7,000 75 8,000 2014 8,500 80 8,500 2015 9,000 85 7,500 2016 8,500 90 9,500 20,000 9,500 2017 95