The records of Collins Aviation include the following accounts for inventory of aviation parts at July 31 of the current year:(Click the icon to view the records.)Read the requirements.Requirement 1. Prepare a partial income statement through gross profit under the average, FIFO, and LIFO methods. Round average cost per unit to two decimal places and all other amounts to the nearest dollar.Collins AviationPartial Income StatementYear Ended July 31Use theAverage cost$Sales revenueCost of goods soldGross profitRequirement 2. Which inventory method would you use to minimize income tax? Explain why this method causes income tax to be the lowest.method to minimize income tax because cost of goods sold is highest (gross profit is lowest) underFIFO126,420 $65,91960,501 $LIFO126,420 $65,37561,045 $126,42068,01558,405when inventory costs are

Name: The records of Collins Aviation include the following accounts for in
Uploaded: 2024-03-20T06:32:37.000Z
Channel: Bartleby
Description: The records of Collins Aviation include the following accounts for inventory of aviation parts at July 31 of the current year:(Click the icon to view the records.)Read the requirements.Requirement 1. Prepare a partial income statement through gross

On the income tax liability side, the inventory method of valuation is having an impact on income…

Business

Accounting

Requirement 2. Which inventory method would you use to minimize income tax? Explain why this method causes income tax to be the lowest. when inventory costs are method to minimize income tax because cost of goods sold is highest (gross profit is lowest) under Use the

Requirement 2. Which inventory method would you use to minimize income tax? Explain why this method causes income tax to be the lowest. when inventory costs are method to minimize income tax because cost of goods sold is highest (gross profit is lowest) under Use the

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Which of the following statements Is/are true? Multiple Cholce In a period of rising costs and stable inventory levels, using the FIFO method leads to a higher taxable income and higher net income compared to the LIFO method. All of the other answer choices are true. In a period of falling costs and stable inventory levels, cost of goods sold is the same under LIFO and FIFO. In a period of rising costs and stable inventory levels, using the LIFO method leads to a lower taxable income and higher net income compared to the FIFO method.
Hoosier Inc. uses the LIFO inventory cost method to prepare the company's tax return. Which method must the company use to account for inventory on their financial statements? Assume US GAAP and rising costs. O FIFO LIFO O Weighted average or LIFO Specific Identification O LIFO or FIFO, but not weighted average
Which of the following regarding the lower of cost ormarket rule for inventory are true?(i) The lower of cost or market rule is an example of thehistorical cost principle.(ii) When the market value of inventory drops belowthe original cost of inventory shown in the financialrecords, net income is reduced.(iii) When the market value of inventory drops belowthe original cost of inventory shown in the financialrecords, total assets are reduced.a. (i) only c. (ii) and (iii)b. (ii) only d. All of the above
Which of the following statements is true of tax rules for applying the lower-of-cost-or- net realizable value method to inventory? Tax rules do not address the choice of methods in applying the lower-of-cost-or- net realizable value method to inventory. Tax rules require the use of the total inventory basis. Tax rules require the use of an individual-item basis if it practicable. O Tax rules require the use of the method which minimizes the recorded loss.
Which one of the following statements is true? a. Income manipulation is difficult under LIFO.b. Accounting principles do not require that the inventory cost flow approximate the physical flow of goods.c. Companies may use LIFO for tax purposes and FIFO in the financial statements.d. In periods of declining prices, LIFO will result in the payment of less income taxes.
Help with this problem
Which of the following statements about the use of the FIFO assumption is NOT true? a.The FIFO assumption assigns the more recent purchase costs to the balance sheet inventory asset account. b.The FIFO assumption is not affected by the inventory control method. c.In periods of rising prices it produces a higher profit than LIFO. d.The FIFO assumption produces inventory asset values that are based on older purchase costs.