Speed World Cycles sells high-performance motorcycles and motocross racers. One of Speed World's most popular modelsis the Kazomma 900 dirt bike. During the current year, Speed World Cycles purchased eight of these bikes at the followingcosts.Purchase DateJuly 1July 22Aug. 3UnitsPurchased Unit Cost Total Cost2338$4,9505,0005,100$ 9,90015,00015,300$ 40,200On July 28, Speed World Cycles sold four Kazomma 900 dirt bikes to the Vince Wilson racing team. The remaining fourbikes remained in inventory at September 30, the end of Speed World's fiscal year.Assume that Speed World Cycles uses a perpetual inventory system. (See the data provided.) b-1. Which of the three cost flow assumptions will result in Speed World Cycles reporting the highest net income for thecurrent year?b-2. Which of the three cost flow assumptions minimizes the income taxes owed by Speed World Cycles for the year?b-3. May Speed World Cycles use the cost flow assumption that results in the highest net income for the current year in itsfinancial statements, but use the cost flow assumption that minimizes taxable income for the current year in its income taxreturn?

In the U.S. the cost flow assumptions include FIFO, LIFO, and average. (If specific identification…

b-1. Which of the three cost flow assumptions will result in Speed World Cycles reporting the highest net income for the current year? b-2. Which of the three cost flow assumptions minimizes the income taxes owed by Speed World Cycles for the year? b-3. May Speed World Cycles use the cost flow assumption that results in the highest net income for the current year in its financial statements, but use the cost flow assumption that minimizes taxable income for the current year in its income tax return?

b-1. Which of the three cost flow assumptions will result in Speed World Cycles reporting the highest net income for the current year? b-2. Which of the three cost flow assumptions minimizes the income taxes owed by Speed World Cycles for the year? b-3. May Speed World Cycles use the cost flow assumption that results in the highest net income for the current year in its financial statements, but use the cost flow assumption that minimizes taxable income for the current year in its income tax return?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 3PB: Cinnamon Depot bakes and sells cinnamon rolls for $1.75 each. The cost of producing 500,000 rolls in...

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