Multiple Choice Questions Waterway Company\'s inventory records show the followi

Question

Multiple Choice Questions

Waterway Company's inventory records show the following data:

A physical inventory on December 31 shows 4100 units on hand. Waterway sells the units for $12 each. The company has an effective tax rate of 18%. Waterway uses the periodic inventory method. If the company uses FIFO, what is the gross profit for the period?

Multiple Choice Question 87

Coronado Company's inventory records show the following data:

A physical inventory on December 31 shows 3900 units on hand. Coronado sells the units for $12 each. The company has an effective tax rate of 20%. Coronado uses the periodic inventory method. What is the difference in taxes if LIFO rather than FIFO is used?

Units Unit Cost Inventory, January 1 9900 $9.20 Purchases:     June 18 9200 8.00                      November 8 6000 7.00

Explanation / Answer

1 Cost of goods sold=(9900*9.2)+(9200*8)+(1900*7)= $177980 Sales=12*(9900+9200+1900)= $252000 Gross Profit=252000-177980=$74020 2 Cost of goods sold FIFO=(10400*9.40)+(9100*7)+(2600*6)= $177060 Cost of goods sold LIFO=(6500*6)+(9100*7)+(6500*9.4)= $163800 Additional taxes=(177060-163800)*20%=$2652 $2652 additional taxes

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