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.

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?

  • CreatedJuly 02, 2013
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