The following data was obtained from the records of ABC Inc., for the current year. Sales during the year were 210 units. Jan 1, 2021Beginning Inventory80 units at $8Jan 11, 2021Purchases65 units at $10Jan 23, 2021Purchases55 units at $ 12January 31Purchases53 units at $14IF THE TAX RATE IS 30%, HOW MUCH IN TAXES WILL ABC SAVE IN THE CURRENT YEAR IF THEY CHOOSE TO USE LIFO INSTEAD OF FIFO?

Under FIFO Method, units which comes in first will be sold first and the ending inventory will be out of the units which comes in last. Hence, Cost of Goods sold = (80 units x $8) + (65 units x $10) + (55 units x $12) + (10 units x $14) Cost of Goods sold = $640 + $650 + $660 + $140 = $2090 Under LIFO Method, units which comes in last will be sold first and the ending inventory will be out of the units which comes in first. Hence, Cost of Goods sold = (37 units x $8) + (65 units x $10) + (55 units x $12) + (53 units x $14) Cost of Goods sold = $296 + $650 + $660 + $742 = $2348 Under LIFO Method, Cost of Goods Sold is $258 more that FIFO Method. It will decrease profit before tax with the same amount. The amount of tax that will be saved under LIFO Method = $258 x 30% = $77.40

Answered: HOW MUCH IN TAXES WILL ABC SAVE IN THE…

Business

Accounting

HOW MUCH IN TAXES WILL ABC SAVE IN THE CURRENT YEAR IF THEY CHOOSE TO USE LIFO INSTEAD OF FIFO?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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bartleby, a Learneo, Inc. business

Jan 1, 2021	Beginning Inventory	80 units at $8
Jan 11, 2021	Purchases	65 units at $10
Jan 23, 2021	Purchases	55 units at $ 12
January 31	Purchases	53 units at $14