Taylor Corporation reports inventory and cost of goods sold based on calculations from a LIFO periodic inventory

Question:

Taylor Corporation reports inventory and cost of goods sold based on calculations from a LIFO periodic inventory system. The company’s records under this system reveal the following inventory layers at the beginning of 2021 (listed in chronological order of acquisition):

10,000 units @ $15..........................$150,000

15,000 units @ $20............................300,000

Beginning inventory........................$450,000

During 2021, 30,000 units were purchased for $25 per unit. Due to unexpected demand for the company’s product, 2021 sales totaled 40,000 units at various prices, leaving 15,000 units in ending inventory.

Required:

1. Calculate the amount to report for cost of goods sold for 2021.

2. Determine the amount of LIFO liquidation profit that the company must report in a disclosure note to its 2021 financial statements. Assume an income tax rate of 25%.

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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