INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
9th Edition
ISBN: 9781260216141
Author: SPICELAND
Publisher: MCG CUSTOM
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Textbook Question
Chapter 8, Problem 8.9P
LIFO liquidation
• LO8–4, LO8–6
Taylor Corporation has used a periodic inventory system and the LIFO cost method since its inception in 2011. The company began 2018 with the following inventory layers (listed in chronological order of acquisition):
| 10,000 units @ $15 | $150,000 |
| 15,000 units @ $20 | 300,000 |
| Beginning inventory | $450,000 |
During 2018, 30,000 units were purchased for $25 per unit. Due to unexpected demand for the company’s product, 2018 sales totaled 40,000 units at various prices, leaving 15,000 units in ending inventory.
Required:
1. Calculate cost of goods sold for 2018.
2. Determine the amount of LIFO liquidation profit that the company must report in a disclosure note to its 2018 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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Exercise 8-23 (Algo) LIFO liquidation [LO8-4, 8-6]
The Churchill Corporation uses a periodic inventory system and the LIFO inventory cost method for its one product. Beginning
inventory of 23,800 units consisted of the following, listed in chronological order of acquisition:
13,900 units at a cost of $8.00 per unit = $111,200
9,900 units at a cost of $9.00 per unit = 89,100
During 2021, inventory quantity declined by 13,800 units. All units purchased during 2021 cost $12.00 per unit.
Required:
Calculate the before-tax LIFO liquidation profit or loss that the company would report in a disclosure note, assuming the amount
determined is material.
X Answer is complete but not entirely correct.
LIFO liquidation profit
32,000 X
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The Foxworthy Corporation uses a periodic inventory system and the LIFO inventory cost method for its one product. Beginning inventory of 40,000 units consisted of the following, listed in chronological order of acquisition: 24,000 units at a cost of $6.00 per unit = $144,000 16,000 units at a cost of $7.00 per unit = 112,000 During 2018, inventory quantity declined by 18,000 units. All units purchased during 2018 cost $8.00 per unit. -Calculate the before-tax LIFO liquidation profit or loss that the company would report in a disclosure note assuming the amount determined is material.
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Exercise 8-23 (Algo) LIFO liquidation [LO8-4, 8-6]
The Churchill Corporation uses a periodic inventory system and the LIFO inventory cost method for its one product. Beginning
inventory of 20,800 units consisted of the following, listed in chronological order of acquisition:
12,400 units at a cost of $8.00 per unit-$99,200
8,400 units at a cost of $9.00 per unit - 75,600
During 2021, inventory quantity declined by 10,800 units. All units purchased during 2021 cost $12.00 per unit.
Required:
Calculate the before-tax LIFO liquidation profit or loss that the company would report in a disclosure note, assuming the amount
determined is material.
Chapter 8 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
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