Question

The accountant at Landry Company is figuring out the difference in income taxes the company will pay depending on the choice of either FIFO or LIFO as an inventory costing method. The tax rate is 30% and the FIFO method will result in income before taxes of $8,740.00. The LIFO method will result in income before taxes of $8,100. What is the difference in tax that would be paid between the two methods?

Answer 1

Tax in FIFO method= 0.3*8,740=2,622

Tax in LIFO method= 0.3*8,100= 2,430

Difference- 2,622-2,430=192

Using the FIFO method will result in $192 more in tax than the LIFO method

Step-by-step explanation: