Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

LIFO Liquidation Profit Hammond Company adopted LIFO when it was formed on January 1, 2017. Since then, the company has had the following purchases and

LIFO Liquidation Profit

Hammond Company adopted LIFO when it was formed on January 1, 2017. Since then, the company has had the following purchases and sales of its single inventory item:

Year Units Purchased Cost per Unit Units Sold Price per Unit
2017 10,000 $6 8,000 $13
2018 12,000 7 9,000 14
2019 15,000 9 14,000 17

In December 2020, the controller realized that because of an unexpected increase in demand, the company had sold 22,000 units but had purchased only 19,000 units during the year. In 2020, each unit had been sold for $20, and each unit purchased had cost $11. The income tax rate is 21%.

Required:

Question Content Area

1. If Hammond makes no additional purchases in 2020, how much LIFO liquidation profit will it report?

$fill in the blank 01746bfc700c01d_1

Question Content Area

2. Prepare the appropriate annual report disclosures for 2020.

blank blank blank
2020 2019
Inventory at FIFO $fill in the blank 932c60f6a02104d_1 $fill in the blank 932c60f6a02104d_2
Less: LIFO valuation allowance fill in the blank 932c60f6a02104d_3 fill in the blank 932c60f6a02104d_4
Inventory at LIFO $fill in the blank 932c60f6a02104d_5 $fill in the blank 932c60f6a02104d_6

Question Content Area

3. If Hammond purchases an additional 8,000 units in December 2020, how much income tax will the company save?

$fill in the blank 891bbf0ca03ef88_1

Question Content Area

4. If Hammond purchases the additional 7,000 units, how much income tax has the company saved over the 4-year period by using LIFO instead of the FIFO cost flow assumption?

$fill in the blank bd80bc011023019_1

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Introduction To Government And Not For Profit Accounting

Authors: Martin Ives, Laurence Johnson, Joseph R. Razek, Gordon A. Hosch

6th Edition

0132366355, 978-0132366359

More Books

Students also viewed these Accounting questions

Question

Be able to differentiate between arbitration and mediation

Answered: 1 week ago

Question

Understand how arbitrators are credentialed and selected

Answered: 1 week ago

Question

Appreciate the advantages of arbitration

Answered: 1 week ago