P7-3 (Algo) Evaluating Four Alternative Inventory Methods Based on Income and Cash Flow LO7-2, 7-3[The following information applies to the questions displayed below.]At the end of January of the current year, the records of Donner Company showed the following for a particular item thatsold at $17.40 per unit:TransactionsInventory, January 1Purchase, January 12Purchase, January 26SaleSaleP7-3 Part 3MethodUnits620600150(480)(200)3. Between FIFO or LIFO, which method would result in the lower income tax expense? Assume a 30 percent average tax rate.your answer to 2 decimal places.)LIFOAmount$3,2554,2001,350Tax Savings

In FIFO method , the units that are purchased first ,are sold first.In LIFO method , the units that…

Answered: Between FIFO or LIFO, which method…

Between FIFO or LIFO, which method would result in the lower income tax expense? Assume a ur answer to 2 decimal places.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

P7-3 (Algo) Evaluating Four Alternative Inventory Methods Based on Income and Cash Flow LO7-2, 7-3
[The following information applies to the questions displayed below.]
At the end of January of the current year, the records of Donner Company showed the following for a particular item that
sold at $17.40 per unit:
Transactions
Inventory, January 1
Purchase, January 12
Purchase, January 26
Sale
Sale
P7-3 Part 3
Method
Units
620
600
150
(480)
(200)
3. Between FIFO or LIFO, which method would result in the lower income tax expense? Assume a 30 percent average tax rate.
your answer to 2 decimal places.)
LIFO
Amount
$3,255
4,200
1,350
Tax Savings

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