In the preparation of its financial statements, the Linda Corporation uses FIFO inventory costing. In the preparation
Question:
In the preparation of its financial statements, the Linda Corporation uses FIFO inventory costing. In the preparation of its federal income taxes return, the Corporation uses LIFO inventory costing. For the year ended December 31, the following information was available from the Corporation's federal income taxes return:
Sales | $600,000 |
Cost of Goods Sold | $475,000 |
Gross Profit | $125,000 |
Operating Expenses | $90,000 |
Income from Operations | $35,000 |
Other Revenues and (Expenses) | ($2,000) |
Income Before Taxes | $33,000 |
Income Taxes Expense | $11,500 |
Net Income | $21,500 |
For the year ended December 31, the following information was available from the Corporation's financial statements distributed to owners:
Sales | $600,000 |
Cost of Goods Sold | $450,000 |
Gross Profit | $150,000 |
Operating Expenses | $90,000 |
Income from Operations | $60,000 |
Other Revenues and (Expenses) | ($2,000) |
Income Before Taxes | $58,000 |
Income Taxes Expense | $20,300 |
Net Income | $37,700 |
Calculate how much more cash the Corporation has available to use by using LIFO inventory costing for tax purposes instead of using FIFO.
a. | - $16,200 | |
b. | 0 | |
c. | $8,800 | |
d. | $16,200 |
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill