Define LIFO and FIFO and state the tax benefits of each. Also, can either LIFO or...
Define LIFO and FIFO and state the tax benefits of each. Also, can either LIFO or FIFO be used to massage the numbers in any way?
Homework Answers
LIFO is used for the valuation of the inventory in which the inventory is purchased last should be sold first. At the time of rising prices, COGS will be high because goods which were acquired recently would be costly due to which profit will decrease. Profit in LIFO usually remains more than FIFO as the last inventory is sold out first.
FIFO is used by most of the enterprises. In this method, the
inventory which is purchased first
should be sold first. With this method, inventory wastage can be
reduced in the case of
perishable goods. At the time of falling prices, COGS will be high
because goods which were
acquired first were costly due to which profit from FIFO will be
less than the profit from LIFO.
Therefore, an entity has to pay more taxes in case of LIFO as more profit is earned through LIFO and if the entity use FIFO, it needs to pay fewer taxes due to lower-income.
FIFO is used to massage the numbers as it shows the lower profit to control the tax expenses. The purpose of this method is not to manipulate the balance sheet but control the revenues for tax purposes.
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Define LIFO and FIFO and state the tax benefits of each.
Also, can either LIFO or...
Comparing Inventory Methods Assume that a firm separately determined inventory under FIFO and LIFO and then...
Comparing Inventory Methods Assume that a firm separately determined inventory under FIFO and LIFO and then compared the results. a. In each dropdown that follows, select the correct sign [less than (<), greater than (>), or equal (=)] for each comparison, assuming periods of rising prices. 1. FIFO inventory LIFO inventory 2. FIFO cost of merchandise sold LIFO cost of merchandise soldd 3. FIFO net income LIFO net income 4. FIFO income taxes LIFO income taxes b. Why would management...
provide example for FIFO and LIFO where they can be used ?
provide example for FIFO and LIFO where they can be used ?
1. is Golf Challenge's change from LIFO TO FIFO ethics ? Consider whether such a change...
1. is Golf Challenge's change from LIFO TO FIFO ethics ?
Consider whether such a change would be misleading to
investors.
2. under what type of circumstance should a company be
permitted to change inventory costing methods?
Beyond the Numbers A10 BTN 5.1 Golf Challenge Corp. is a retail sports store carrying golf apparel and equipment. The store is at ETHICS the end of its second year of operation and is struggling. A major problem is that its cost of...
Explain the difference between LIFO and FIFO and document the method used for each of the...
Explain the difference between LIFO and FIFO and document the method used for each of the three companies(Coca Cola,Pepsi and Dr Pepper).
Exercise 5-6A Income tax effect of shifting from FIFO to LIFO LO 5-1 [The following information...
Exercise 5-6A Income tax effect of shifting from FIFO to LIFO LO 5-1 [The following information applies to the questions displayed below.] The following information pertains to the inventory of Parvin Company during Year 2: Jan. 1 Beginning Inventory 750 units @ $ 33 Apr. 1 Purchased 2,700 units @ $ 38 Oct. 1 Purchased 950 units @ $ 41 During Year 2, Parvin sold 4,000 units of inventory at $90 per unit and incurred $45,000 of operating expenses....
Chapter 5 Homework Required information Exercise 5-6 Income tax effect of shifting from FIFO to LIFO...
Chapter 5 Homework Required information Exercise 5-6 Income tax effect of shifting from FIFO to LIFO LO 5-1 (The following information applies to the questions displayed below.) Part 2 of 3 The following information pertains to the inventory of Parvin Company for Year 3: 11.11 points Jan. 1 Apr. 1 Oct. 1 Beginning inventory Purchased Purchased 400 units @ $17 3,000 units @ $22 900 units @ $23 eBook During Year 3, Parvin sold 3,655 units of inventory at $41...
For each of the following statements, indicate whether the correct answer is FIFO, LIFO, or neither....
For each of the following statements, indicate whether the
correct answer is FIFO, LIFO, or neither. **Pay special attention
to whether prices are rising or declining.
For each of the following statements, indicate whether the correct answer is FIFO, LIFO, or neither. ** Pay special attention to whether prices are rising or declining. When inventory costs are rising, this method yields the lowest income tax expense. Choose... When inventory costs are declining, this method yields the highest gross profit. Choose......
Match each description to the appropriate cost flow assumption (a-c). a. FIFO b. LIFO c. Weighted...
Match each description to the appropriate cost flow assumption (a-c). a. FIFO b. LIFO c. Weighted average 5. Produces the same cost of merchandise sold under both the periodic and the perpetual inventory system 6. Rarely used with a perpetual inventory system 7. Produces results that are similar to the specific identification method 8. Widely used for tax purposes 9. Never results in either the highest or lowest possible net income 10. Produces the highest gross profit when costs are...
ATW Corporation currently uses the FIFO method of accounting for its inventory for book and tax...
ATW Corporation currently uses the FIFO method of accounting for its inventory for book and tax purposes. Its beginning inventory for the current year was $8,000,000. Its ending inventory for the current year was $7,000,000. If ATW had been using the LIFO method of accounting for its inventory, its beginning inventory would have been $7,000,000 and its ending inventory would have been $5,500,000. Problem 5-30 Part a a. How much more in taxes did ATW Corporation pay for the current...
U UNUIDIoyment tax. Also, the company provides the following benefits for employees: health insurance company, $2,800),...
U UNUIDIoyment tax. Also, the company provides the following benefits for employees: health insurance company, $2,800), life insurance (cost to the company, $370), and retirement benefits (cost to the compar salaries expense). (Click the icon to view payroll tax rate information.) Read the reg i Requirements Requiremen required. Begin with th first, then cre 1. Journalize Pablo's expenses for employee benefits and for payroll taxes. Explanations are not required. 2. What was Pablo's total expense for 2018 related to payroll?...
1. is Golf Challenge's change from LIFO TO FIFO ethics ?
Consider whether such a change would be misleading to
investors.
2. under what type of circumstance should a company be
permitted to change inventory costing methods?
Beyond the Numbers A10 BTN 5.1 Golf Challenge Corp. is a retail sports store carrying golf apparel and equipment. The store is at ETHICS the end of its second year of operation and is struggling. A major problem is that its cost of...
Chapter 5 Homework Required information Exercise 5-6 Income tax effect of shifting from FIFO to LIFO LO 5-1 (The following information applies to the questions displayed below.) Part 2 of 3 The following information pertains to the inventory of Parvin Company for Year 3: 11.11 points Jan. 1 Apr. 1 Oct. 1 Beginning inventory Purchased Purchased 400 units @ $17 3,000 units @ $22 900 units @ $23 eBook During Year 3, Parvin sold 3,655 units of inventory at $41...
For each of the following statements, indicate whether the
correct answer is FIFO, LIFO, or neither. **Pay special attention
to whether prices are rising or declining.
For each of the following statements, indicate whether the correct answer is FIFO, LIFO, or neither. ** Pay special attention to whether prices are rising or declining. When inventory costs are rising, this method yields the lowest income tax expense. Choose... When inventory costs are declining, this method yields the highest gross profit. Choose......
Match each description to the appropriate cost flow assumption (a-c). a. FIFO b. LIFO c. Weighted average 5. Produces the same cost of merchandise sold under both the periodic and the perpetual inventory system 6. Rarely used with a perpetual inventory system 7. Produces results that are similar to the specific identification method 8. Widely used for tax purposes 9. Never results in either the highest or lowest possible net income 10. Produces the highest gross profit when costs are...
ATW Corporation currently uses the FIFO method of accounting for its inventory for book and tax purposes. Its beginning inventory for the current year was $8,000,000. Its ending inventory for the current year was $7,000,000. If ATW had been using the LIFO method of accounting for its inventory, its beginning inventory would have been $7,000,000 and its ending inventory would have been $5,500,000. Problem 5-30 Part a a. How much more in taxes did ATW Corporation pay for the current...
U UNUIDIoyment tax. Also, the company provides the following benefits for employees: health insurance company, $2,800), life insurance (cost to the company, $370), and retirement benefits (cost to the compar salaries expense). (Click the icon to view payroll tax rate information.) Read the reg i Requirements Requiremen required. Begin with th first, then cre 1. Journalize Pablo's expenses for employee benefits and for payroll taxes. Explanations are not required. 2. What was Pablo's total expense for 2018 related to payroll?...
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