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29.03.2021 •
Business
Fern Company is a U.S.-based company that designs and builds compressors for large HVAC units. Fern decides to build a new plant in China, its first attempt at doing business internationally. During its start-up phase, Fern incurs $2,000,000 of start-up costs including $1,000,000 in legal fees, $700,000 to introduce its product, and another $300,000 in state fees to the Chinese government to organize the new business entity. Fern Company's CEO fully expects the company to become profitable during its 3rd year of operations. How should Fern Company account for these costs
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Ответ:
$3,445
Explanation:
Let's first organize the data provided in the question:
Oct 1: inventory, 8 units, $200 each
Oct 2: purchase, 20 units, $205 each
Oct 4: sale, 11 units
Since we are asked to use the LIFO (Last-In, First-Out) method...
the 11 units sold were taken from the Oct 2 purchase... which leaves:
8 units at $200 each from initial inventory (8 x $200 = $1,600)
and 9 units from Oct 2 purchase, at $205 each (9 * $205 = $1,845)
Total value of the inventory: $1,600 + $1,845 = $3,445