Required information (The following information.applies to the questions displayed below.] The following information pertains to the inventory of Parvin Company during Year 2: Jan. 1 Apr. 1 Oct. 1 Beginning Inventory Purchased Purchased 600 units @ $ 38 2,400 units @ $ 43 800 units @ $ 46 During Year 2, Parvin sold 3,500 units of inventory at $95 per unit and incurred $43,500 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 40 percent income tax rate. Parvin started the period with cash of $79,000, inventory of $22,800, common stock of $54,000, and retained earnings of $47,800. c. Determine the amount of income tax that Parvin would pay using each cost flow method.
Required information (The following information.applies to the questions displayed below.] The following information pertains to the inventory of Parvin Company during Year 2: Jan. 1 Apr. 1 Oct. 1 Beginning Inventory Purchased Purchased 600 units @ $ 38 2,400 units @ $ 43 800 units @ $ 46 During Year 2, Parvin sold 3,500 units of inventory at $95 per unit and incurred $43,500 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 40 percent income tax rate. Parvin started the period with cash of $79,000, inventory of $22,800, common stock of $54,000, and retained earnings of $47,800. c. Determine the amount of income tax that Parvin would pay using each cost flow method.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please answer full question.
![### Required Information
**[The following information applies to the questions displayed below.]**
The following information pertains to the inventory of Parvin Company during Year 2:
- **Jan. 1**
- Beginning Inventory: 600 units @ $38
- **Apr. 1**
- Purchased: 2,400 units @ $43
- **Oct. 1**
- Purchased: 800 units @ $46
During Year 2, Parvin sold 3,500 units of inventory at $95 per unit and incurred $43,500 of operating expenses. Parvin currently uses the FIFO (First-In, First-Out) method but is considering a change to LIFO (Last-In, First-Out). All transactions are cash transactions. Assume a 40 percent income tax rate. Parvin started the period with cash of $79,000, inventory of $22,800, common stock of $54,000, and retained earnings of $47,800.
---
**c. Determine the amount of income tax that Parvin would pay using each cost flow method.**
| Method | Amount |
|----------------------------|-------------------|
| Income tax paid using FIFO | |
| Income tax paid using LIFO | |](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb75e2346-ebf2-4e14-802c-14c74b6109ef%2F1141c04e-3e33-444b-a6d0-6d1ee0117aa9%2F7ixvkt_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Required Information
**[The following information applies to the questions displayed below.]**
The following information pertains to the inventory of Parvin Company during Year 2:
- **Jan. 1**
- Beginning Inventory: 600 units @ $38
- **Apr. 1**
- Purchased: 2,400 units @ $43
- **Oct. 1**
- Purchased: 800 units @ $46
During Year 2, Parvin sold 3,500 units of inventory at $95 per unit and incurred $43,500 of operating expenses. Parvin currently uses the FIFO (First-In, First-Out) method but is considering a change to LIFO (Last-In, First-Out). All transactions are cash transactions. Assume a 40 percent income tax rate. Parvin started the period with cash of $79,000, inventory of $22,800, common stock of $54,000, and retained earnings of $47,800.
---
**c. Determine the amount of income tax that Parvin would pay using each cost flow method.**
| Method | Amount |
|----------------------------|-------------------|
| Income tax paid using FIFO | |
| Income tax paid using LIFO | |
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