Chapter 8, Problem 8.9P

1.

To determine

Last-in-First-Out method, the costs of last purchased items are sold first. The value of the closing stock consists the initial purchased items.

LIFO Liquidation: It occurs when a company following LIFO method for inventory valuation, has more current sales than its current purchases. It arises because the company sells its old stock of inventory in the current period at the current selling price. It increases the net income thereby causing a higher tax liability in the current period.

To Compute: The amount of cost of goods sold.

2.

To determine

To Compute: The LIFO liquidation profit or loss.

3.

To determine

To Compute: The income tax amount that can be saved if the company decided to purchase an additional 10,000 units at $25 per unit.