Exercise 5-6A (Algo) Income tax effect of shifting from FIFO to LIFO LO 5-1

Skip to question

[The following information applies to the questions displayed below.]

The following information pertains to the inventory of Parvin Company during Year 2.

January 1	Beginning Inventory	800 units @ $35
April 1	Purchased	2,800 units @ $40
October 1	Purchased	1,000 units @ $43

During Year 2, Parvin sold 4,200 units of inventory at $95 per unit and incurred $45,500 of operating expenses. Parvin currently uses the FIFO method but is considering a change to LIFO. All transactions are cash transactions. Assume a 40 percent income tax rate. Parvin started the period with cash of $83,000, inventory of $28,000, common stock of $58,000, and retained earnings of $53,000.

Exercise 5-6A (Algo) Part a

Required a. Record the above transactions in general journal form and post to T-accounts using (1) FIFO and (2) LIFO. Use a separate set of journal entries and T-accounts for each method.

required" in the first account field.) Post the above transactions to T-accounts using FIFO. Record the above transactions in general journal form using LIFO. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 1 Record purchases of merchandise inventory for cash. 2 Record purchases of merchandise inventory for cash. 3 Record sale of inventory for cash. 4 Record entry for cost of goods sold. 5 Record entry for operating expenses paid. 6 Record entry for income tax expenses paid. Note : = journal entry has been entered Post the above transactions to T-accounts using LIFO