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Interpreting the Effects of Inventory Valuation on Financial Results Jasmine Company uses the LIFO costing method to value its inventory. The company reported the following information in its Year 2 annual report. Decmeber 31 Total inventories at FIFO Year 2 Year 1 $60,000 $72.000 Less LIFO allowance -18.000 -14.400 Total inventories, less allowance $42.000 $57.600 a. On the company's Year 2 balance sheet, what dollar amount is reported for inventory? S b. Had the company reported inventory under the FIFO method, what dollar amount would be reported on the company's Year 2 balance sheet? 5 c. If the company reported $120,000 in its Year 2 income statement for cost of goods sold, what is the dollar amount of cost of goods sold under FIFO? S D d. Assurning a 25% tax rate. what is the difference in Year 2 taxes considering the company valued inventory using LIFO (for both financial reporting and tax purposes) instead of FIFO (for both financial reporting and tax purposes)?

Interpreting the Effects of Inventory Valuation on Financial Results Jasmine Company uses the LIFO costing method to value its inventory. The company reported the following information in its Year 2 annual report. Decmeber 31 Total inventories at FIFO Year 2 Year 1 $60,000 $72.000 Less LIFO allowance -18.000 -14.400 Total inventories, less allowance $42.000 $57.600 a. On the company's Year 2 balance sheet, what dollar amount is reported for inventory? S b. Had the company reported inventory under the FIFO method, what dollar amount would be reported on the company's Year 2 balance sheet? 5 c. If the company reported $120,000 in its Year 2 income statement for cost of goods sold, what is the dollar amount of cost of goods sold under FIFO? S D d. Assurning a 25% tax rate. what is the difference in Year 2 taxes considering the company valued inventory using LIFO (for both financial reporting and tax purposes) instead of FIFO (for both financial reporting and tax purposes)?

FINANCIAL ACCOUNTING
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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Interpreting the Effects of Inventory Valuation on Financial Results Jasmine Company uses the LIFO costing method to value its inventory. The company reported the following information in its Year 2 annual report. Decmeber 31 Total inventories at FIFO Less LIFO allowance -18,000 -14,400 Total inventories, less allowance $42,000 $57,600 Year 2 Year 1 $60,000 $72,000 a. On the company's Year 2 balance sheet, what dollar amount is reported for inventory? $ b. Had the company reported inventory under the FIFO method, what dollar amount would be reported on the company's Year 2 balance sheet? c. If the company reported $120,000 in its Year 2 income statement for cost of goods sold, what is the dollar amount of cost of goods sold under FIFO? $ d. Assuming a 25% tax rate, what is the difference in Year 2 taxes considering the company valued inventory using LIFO (for both financial reporting and tax purposes) instead of $ FO (for both financial reporting and tax purposes)?
Transcribed Image Text:Interpreting the Effects of Inventory Valuation on Financial Results Jasmine Company uses the LIFO costing method to value its inventory. The company reported the following information in its Year 2 annual report. Decmeber 31 Total inventories at FIFO Less LIFO allowance -18,000 -14,400 Total inventories, less allowance $42,000 $57,600 Year 2 Year 1 $60,000 $72,000 a. On the company's Year 2 balance sheet, what dollar amount is reported for inventory? $ b. Had the company reported inventory under the FIFO method, what dollar amount would be reported on the company's Year 2 balance sheet? c. If the company reported $120,000 in its Year 2 income statement for cost of goods sold, what is the dollar amount of cost of goods sold under FIFO? $ d. Assuming a 25% tax rate, what is the difference in Year 2 taxes considering the company valued inventory using LIFO (for both financial reporting and tax purposes) instead of $ FO (for both financial reporting and tax purposes)?
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