Question
Exercise 5-6A Income tax effect of shifting from FIFO to LIFO LO 5-1 [The following information applies to the questions displayed below.] The following information
Exercise 5-6A 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 during Year 2:
Jan. 1 | Beginning Inventory | 750 | units | @ | $ | 33 | |
Apr. 1 | Purchased | 2,700 | units | @ | $ | 38 | |
Oct. 1 | Purchased | 950 | units | @ | $ | 41 | |
During Year 2, Parvin sold 4,000 units of inventory at $90 per unit and incurred $45,000 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 $82,000, inventory of $24,750, common stock of $57,000, and retained earnings of $49,750.
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. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
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