Taylor Corporation has used a periodic inventory system and the LIFO cost method since its inception in 2009. The company began 2016 with the following inventory layers (listed in chronological order of acquisition): $150,000 10,000 units @ $15 15,000 units @ $20 300,000 $450,000 Beginning inventory During 2016, 30,000 units were purchased for $25 per unit. Due to unexpected demand for the company's prod- uct, 2016 sales totaled 40,000 units at various prices, leaving 15,000 units in ending inventory. Required: 1. Calculate cost of goods sold for 2016. 2. Determine the amount of LIFO liquidation profit that the company must report in a disclosure note to its 2016 financial statements. Assume an income tax rate of 40%. 3. If the company decided to purchase an additional 10,000 units at $25 per unit at the end of the year, how much income tax currently payable would be saved?
Taylor Corporation has used a periodic inventory system and the LIFO cost method since its inception in 2009. The company began 2016 with the following inventory layers (listed in chronological order of acquisition): $150,000 10,000 units @ $15 15,000 units @ $20 300,000 $450,000 Beginning inventory During 2016, 30,000 units were purchased for $25 per unit. Due to unexpected demand for the company's prod- uct, 2016 sales totaled 40,000 units at various prices, leaving 15,000 units in ending inventory. Required: 1. Calculate cost of goods sold for 2016. 2. Determine the amount of LIFO liquidation profit that the company must report in a disclosure note to its 2016 financial statements. Assume an income tax rate of 40%. 3. If the company decided to purchase an additional 10,000 units at $25 per unit at the end of the year, how much income tax currently payable would be saved?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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
Transcribed Image Text:Taylor Corporation has used a periodic inventory system and the LIFO cost method since its inception in 2009.
The company began 2016 with the following inventory layers (listed in chronological order of acquisition):
$150,000
10,000 units @ $15
15,000 units @ $20
300,000
$450,000
Beginning inventory
During 2016, 30,000 units were purchased for $25 per unit. Due to unexpected demand for the company's prod-
uct, 2016 sales totaled 40,000 units at various prices, leaving 15,000 units in ending inventory.
Required:
1. Calculate cost of goods sold for 2016.
2. Determine the amount of LIFO liquidation profit that the company must report in a disclosure note to its 2016
financial statements. Assume an income tax rate of 40%.
3. If the company decided to purchase an additional 10,000 units at $25 per unit at the end of the year, how
much income tax currently payable would be saved?
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