Exercise 5-6 Income tax effect of shifting from FIFO to LIFO LO 5-1 [The following information applies to the questions displayed below) The following Information pertains to the inventory of Parvin Company for Year 3: Jan. 1 Apr. 2 Beginning inventory Purchased Purchased 400 units $19 2,900 units $24 1,100 units $25 Oct. 1 During Year 3, Parvin sold 3,740 units of inventory at $40 per unit and incurred $15,500 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 30 percent income tax rate. Parvin started the period with cash of $114,900, Inventory of $7,600, common stock of $98,000, and retained earnings of $24,500. Exercise 5-6 Part a a. Prepare income statements using FIFO and LIFO. (Round intermediate calculations and final answers to the nearest whole dollar amount.) PARVIN COMPANY Income Statements For the Year Ended December 31. Year 3 FIFO LIPO Income before tax Required Information Exercise 5-6 Income tax effect of shifting from FIFO to LIFO LO 5-1 [The following Information applles to the questions displayed below.) The following information pertains to the inventory of Parvin Company for Year 3: Jan. 1 Apr. 1 Oct. 1 Beginning inventory Purchased Purchased 400 units e $19 2,900 units @ $24 1,100 units @ $25 During Year 3, Parvin sold 3,740 units of inventory at $40 per unit and incurred $15,500 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 30 percent income tax rate. Parvin started the period with cash of $114,900, inventory of $7,600, common stock of $98,000, and retained earnings of $24,500. Exercise 5-6 Part b b. Determine the amount of income tax that Parvin would pay using each cost flow method. FIFO LIFO Income tax Required Information Exercise 5-6 Income tax effect of shifting from FIFO to LIFO LO 5-1 [The following information applies to the questions displayed below.) The following Information pertains to the inventory of Parvin Company for Year 3: Jan. 1 Apr. 1 Beginning inventory Purchased Purchased 400 units $19 2,900 units $24 1,100 units @ $25 Oct. 1 During Year 3, Parvin sold 3,740 units of Inventory at $40 per unit and incurred $15,500 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 30 percent Income tax rate. Parvin started the period with cash of $114,900, Inventory of $7,600, common stock of $98,000, and retained earnings of $24,500. Exercise 5-6 Part c. Determine the cash flow from operating activities under FIFO and LIFO. (Round intermediate calculations and final answers to nearest whole dollar amount. Amounts to be deducted should be indicated with minus sign.) FIFO LIFO Net cash flow from operating activities
