Question
Carolina Company uses the LIFO method for valuing its ending inventory. The following financial statement information is available for its first year of operation: Carolina
Carolina Company uses the LIFO method for valuing its ending inventory. The following financial statement information is available for its first year of operation: Carolina Company Income Statement For the year ended December 31 Sales 60,000 Cost of Goods sold 23,000 Gross Profit 37,000 Expenses 13,000 Income before taxes $ 24,000 Carolina's ending inventory using the LIFO method was $8,700. Carolina's accountant determined that had the company used FIFO, the ending inventory would have been $9,100
. a. Determine what the income before taxes would have been, had Carolina used the FIFO method of inventory valuation instead of LIFO. b. What would be the difference in income taxes between LIFO and FIFO, assuming a 30% tax rate? c. If Carolina wanted to lower the amount of income taxes to be paid, which method would it choose?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started