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

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

Jan. 1	Beginning Inventory	550	units	@	$	36
Apr. 1	Purchased	2,450	units	@	$	41
Oct. 1	Purchased	750	units	@	$	44

During Year 2, Parvin sold 3,400 units of inventory at $80 per unit and incurred $48,500 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 $89,000, inventory of $19,800, common stock of $64,000, and retained earnings of $44,800.

Can't figure out income tax expense

FIFO No 1 Credit X Answer is not complete. General Journal Merchandise inventory Cash Date Apr 01 Debit 100,450 100,450 2. Oct 01 33,000 Merchandise inventory Cash 33,000 3 Dec 31 272,000 Cash Sales revenue SS SS SS 272,000 4 4 Dec 31 Cost of goods sold Merchandise inventory 137,850 137,850 8 9 5 Dec 31 48,500 Operating expenses Cash 48,500 6 Dec 31 Income tax expense Cash 108,800X FIFO Beg. Bal 89,000 272,000 ( Beg Bal 4/1 48,500 100,450 4/1 10/1 19,800 100,450 137,850 Year 2 33,000 v a 15,400 End Bal 212,050 End. Bal Beg. Bal Common Stock 64,000 Beg. Bal Retained Earnings ( 44,800 End. Bal 64,000 End. Bal 44,800 Sales Revenue Beg. Bal Cost of Goods Sold Beg. V v Bal Year 2137,850 ( 272,000 End. Bal 272,000 End. Bal 137,850 Operating Expenses Income Tax Expense Beg Bal ( Beg. Bal (v 48,500 So End. Bal 48,500 End. Bal LIFO No 1 Credit Date Apr 01 X Answer is not complete. General Journal Merchandise inventory Cash Debit 100,450 100,450 2 Oct 01 33,000 Merchandise inventory Cash 33,000 33,000 3 Dec 31 272,000 Cash Sales revenue 272,000 SS SS SS SS 4 Dec 31 Cost of goods sold Merchandise inventory 140,650 140,650 5 Dec 31 48,500 Operating Expenses Cash 48,500 6 6 Dec 31 Income tax expense Cash LIFO Beg. Bal 89,000 272,000 48,500 Beg. Bal 14/1 10/1 19,800 100,450140,650 Year 2 33,000 (v 100,4504/1 End. Bal 212,050 End. Bal 12,600 Common Stock Beg. Bal 64,000 Beg. Bal SSO Retained Earnings (v 44,800 ( a End. Bal 64,000 End. Bal 44,800 Sales Revenue Beg. Bal (y > 272,000 Cost of Goods Sold Beg. (v v Bal Year 2140,650 CV CV End. 140,650 Bal End. Bal 272,000 Operating Expenses Beg. Bal Income Tax Expense V v ( Beg Bal (v 48,500 End. Bal 48,500 End. Bal