Question

Kan Company's inventory records for its retail division show the following at January 31: (Click the icon to view the accounting records.) Al January 31, 11 of these units are on hand. Ken Company calculaled ils cost of goods sold using LIFO as $2.773 and its cost of goods sold using FIFO as $2,665. Read the requirement. How much in taxes would Ken Company, save by using the LIFO method versus FIFO? Sales revenue is $8.960, operating expenses are $1,700, and the income tax rate is 25%. (Round your answer to the nearest cent.) Difference in methods x Income tax rate Tax savings using LIFO i Data Table - X i Requirement - X $ 1. How much in taxes would Ken Company, save by using the LIFO method versus FIFO? Sales revenue is $8.960, operating expenses are $1.700, and the income tax rate is 25%. (Round your answer to the nearest cent.) Jan 1 Beginning inventory .... 9 units @ 15 Purchase ............ 5 units @ 26 Purchase ............ 13 units @ 165 = $ 1,485 166 = $ 830 175 = $ 2,275 Print Done Print Done

Answer 1

	Difference in Methods	$           108
	X Income Tax rate	25%
	Tax savings using LIFO	$             27
	Workings:
		LIFO	FIFO
	Sales	$       8,960	$             8,960
Less:	Cost of goods sold	$       2,773	$             2,665
Less:	Operating expenses	$       1,700	$             1,700
	Income / (loss)	$       4,487	$             4,595
	Difference in Methods	=	$4595 - $4487
		=	$                108
	Tax savings using LIFO	=	$108 X 25%
		=	$                   27