LIFO Liquidation Profit Hammond Company adopted LIFO when it was formed on January 1, 2017. Since...
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LIFO Liquidation Profit Hammond Company adopted LIFO when it was formed on January 1, 2017. Since then, the company has had the following purchases and sales of its single inventory item: Year Units Purchased Cost per Unit Units Sold Price per Unit 2017 10,000 $4 8,000 $10 2018 12,000 5 2019 15,000 7 9,000 14,000 11 14 In December 2020, the controller realized that because of an unexpected increase in demand, the company had sold 22,000 units but had purchased only 19,000 units during the year. In 2020, each unit had been sold for $17, and each unit purchased had cost $9. The income tax rate is 21%. Required: 1. If Hammond makes no additional purchases in 2020, how much LIFO liquidation profit will it report? 2. Prepare the appropriate annual report disclosures for 2020. 2020 2019 Inventory at FIFO Weighted averaw FRATE COMPANY Computation of Inventory Under Weighted Average Inventory Hethod Harch 31, 2019 Units Unit cost Total cost 2. Prepare the appropriate annual report disclosures for 2020. Inventory at FIFO Less: LIFO valuation allowance Inventory at LIFO 2020 2019 3. If Hammond purchases an additional 7,000 units in December 2020, how much income tax will the company save? 4. If Hammond purchases the additional 7,000 units, how much income tax has the company saved over the 4-year period by using LIFO instead of the FIFO cost flow assumption? LIFO Liquidation Profit Hammond Company adopted LIFO when it was formed on January 1, 2017. Since then, the company has had the following purchases and sales of its single inventory item: Year Units Purchased Cost per Unit Units Sold Price per Unit 2017 10,000 $4 8,000 $10 2018 12,000 5 2019 15,000 7 9,000 14,000 11 14 In December 2020, the controller realized that because of an unexpected increase in demand, the company had sold 22,000 units but had purchased only 19,000 units during the year. In 2020, each unit had been sold for $17, and each unit purchased had cost $9. The income tax rate is 21%. Required: 1. If Hammond makes no additional purchases in 2020, how much LIFO liquidation profit will it report? 2. Prepare the appropriate annual report disclosures for 2020. 2020 2019 Inventory at FIFO Weighted averaw FRATE COMPANY Computation of Inventory Under Weighted Average Inventory Hethod Harch 31, 2019 Units Unit cost Total cost 2. Prepare the appropriate annual report disclosures for 2020. Inventory at FIFO Less: LIFO valuation allowance Inventory at LIFO 2020 2019 3. If Hammond purchases an additional 7,000 units in December 2020, how much income tax will the company save? 4. If Hammond purchases the additional 7,000 units, how much income tax has the company saved over the 4-year period by using LIFO instead of the FIFO cost flow assumption?
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Question LIFO Liquidation Profit Hammond Company adopted LIFO when it was formed on January 1 2017 Since then the company has had the following purchases and sales of its single inventory item Year Co... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
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