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7 - 7 9 Year - End Purchases and LIFO Layers Study Appendix 7 A . A company engaged in the manufacture and sale of
YearEnd Purchases and LIFO Layers
Study Appendix A A company engaged in the manufacture and sale of dental supplies maintained an inventory of gold for use in its business. The company used LIFO for the gold content of its products.
On the final day of its fiscal year, the company bought ounces of gold at $ per ounce. Had the purchase not been made, the company would have penetrated its LIFO layers for ounces of gold acquired at $ per ounce.
The applicable income tax rate is
Compute the effect of the yearend purchase on the income taxes of the fiscal year.
On the second day of the next fiscal year, the company resold the ounces of gold to its suppliers. What do you think the IRS should do if it discovers this resale? Explain.
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