Question

Uklite Copy Centre Ltd. uses laser printers. The company started the year with 100 containers of ink (weighted average cost of $9.40 each, FIFO cost of $9.10 each). During the year, Uklite Copy Centre purchased 800 containers of ink at $10.20 each and sold 600 units for $23.00 each. The company paid operating expenses throughout the year, a total of $3,900. Uklite Copy Centre's income statement-excluding the effects of income tax under each of the weighted average-cost and FIFO inventory costing methods - is given. Uklite Copy Centre is a corporation subject to a 17% income tax. (Click the icon to view the income statement.) Compute Uklite Copy Centre's income tax expense under the weighted average cost and FIFO inventory costing methods. Which method would you select to (a) maximize income before tax and (b) minimize income tax expense? Compute Uklite Copy Centre's income tax expense using the weighted average-cost and FIFO inventory costing methods. (Round your answer to the nearest whole dollar.) Uklite Copy Centre Ltd. Income Statement For the Year Ended December 31, 2017 FIFO Weighted - Average Cost 13,800 $ 6,066 Sales revenue $ 13,800 6,010 Cost of goods sold Gross profit $ 7,734 3,900 Operating expenses 7,790 3,900 3,890 Net income before tax 3,834 $ Income tax expense

Answer 1

Correct Answer:

Uklite copy Centre Ltd.
Income statement
For the year Ended December 31, 2017
	Weighted-Average cost	FIFO
Sales revenue	13800	13800
Cost of goods sold	6066	6010
Gross profit	7734	7790
Operating expenses	3900	3900
Net income before tax	3834	3890
Income tax expense @ 17%	651.78	661.3
Net income after tax	3182.22	3228.7

1. The income before taxes is maximized by using FIFO method of inventory costing.
2. The income taxes are minimized by using the Weighted-Average method of inventory costing.

End of answer.

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