Question
Cathy Company is a wholesaler of musical instruments. Cathy has used the LIFO inventory method for more than 40 years. Near the end of
Cathy Company is a wholesaler of musical instruments. Cathy has used the LIFO inventory method for more than 40 years. Near the end of 2021, before computing 2021 cost of goods sold, the company's inventory of trumpets listed three LIFO layers, two of which were from earlier years and one from 2021 purchases: Layer 1 Layer 2 2021 Purchases Total Available No. of Units Unit Cost 4,500 $40 2,500 60 29,500 80 36,500 In 2021, Cathy sold 29,500 trumpets. On December 27, 2021, Cathy had a chance to buy 30,000 more trumpets at $95 each. The offer was good for 10 days, and delivery would be immediate on placing the order. The purchasing manager of Cathy is trying to decide whether to make the purchase in 2021 or 2022. Assuming a tax rate of 40%, what is the tax savings in 2021 of purchasing the trumpets in 2021?
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