Question

MC Qu. 55 Nu Company reported the following... Nu Company reported the following pretax data for its first year of operations. Net sales Cost of goods available for sale Operating expenses Effective tax rate Ending inventories: If LIFO is elected If FIFO is elected 2,960 2,440 810 40% 980 1,260 What is Nu's gross profit ratio if it elects LIFO? (Round your answer to the nearest whole percentage.)

Answer 1

First we will calculate cost of goods sold as per below:

Cost of good sold = Cost of goods available for sale - Ending inventories as per LIFO

Cost of goods sold = $2440 - $980 = $1460

Now, Gross profit ratio is given by:

Gross profit ratio = Sales - Cost of goods sold / Net sales * 100

Putting the values in the above equation, we get,

Gross Profit ratio = ($2960 - $1460) / $2960 * 100

Gross Profit ratio = $1500 / $2960* 100

Gross Profit ratio = 51%