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P 8-9 LIFO Liquidation

P 8-9 LIFO Liquidation
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ACCOUNTING

Problem 8-9 (P8-9) LIFO Liquidation

Taylor Corporation has used a periodic inventory system and the LIFO cost method since its inception in 2004. The company began 2011 with the following inventory layers (listed in chronological order of acquisition):

During 2011, 30,000 units were purchased for $25 per unit. Due to unexpected demand for the company's product, 2011 sales totaled 40,000 units at various prices, leaving 15,000 units in ending inventory.

Required:
1. Calculate cost of goods sold for 2011.
2. Determine the amount of LIFO liquidation profit that the company must report in a disclosure note to its 2011 financial statements. Assume an income tax rate of 40%.
3. If the company decided to purchase an additional 10,000 units at $25 per unit at the end of the year, how much income tax currently payable would be saved?

 

FILE: MS WORD

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