Question

Bramble Corp. has been using the LIFO method of inventory valuation for 10 years, since it began operations. Its 2020 ending inventory was $61000, but it would have been $87000 if FIFO had been used. Thus, if FIFO had been used, Bramble's income before income taxes would have been:______.

Answer 1

Answer:if FIFO had been used, Bramble's income before income taxes would have been $26,000_greater over the 10 year period.___

Explanation:The FIFO inventory costing method usually produce a higher net income, and thus a higher tax liability, because it reports low cost of product than the LIFO method, this is why every company should be aware of the inventory costing method it uses because the higher the cost of product a company reports, the lower its net income, leading to lower income tax liability and the lower the cost of product a company reports, the higher net income and income tax liability.

For Bamble Corp. who has been using the LIFO method of inventory valuation for 10 years, since it began operations. Its 2020 ending inventory was $61000, but it would have been $87000 if FIFO had been used. Bramble's income before income taxes would have been $26,000 greater over the 10 year period.