Question

Taylor Corporation has used a periodic inventory system and the LIFO cost method since its inception in 2004. The company began 2011 with the following inventory layers (listed in chronological order of acquisition):
10,000 Units $15 .... $150,000
15,000 Units $20 ..... 300,000
Beginning inventory .... $450,000

During 2011, 30,000 units were purchased for $25 per unit. Due to unexpected demand for the company's product, 2011 sales totaled 40,000 units at various prices, leaving 15,000 units in ending inventory.

Required:
1. Calculate cost of goods sold for 2011.
2. Determine the amount of LIFO liquidation profit that the company must report in a disclosure note to its 2011 financial statements. Assume an income tax rate of 40%.
3. If the company decided to purchase an additional 10,000 units at $25 per unit at the end of the year, how much income tax currently payable would be saved?



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  • CreatedJuly 02, 2013
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