Monitor Company uses the LIFO method for valuing its ending inventory. The following financial statement information is available for their first year of operation: Monitor's ending inventory using the LIFO method was $8,200. Monitor's accountant determined that had they used FIFO, the ending inventory would have been $8,500.
a. Determine what the income before taxes would have been had Monitor used the FIFO method of inventory valuation instead of LIFO.
b. What would be the difference in income taxes between LIFO and FIFO, assuming a 30% tax rate?

Question

Monitor Company uses the LIFO method for valuing its ending inventory. The following financial statement information is available for their first year of operation:  Monitor's ending inventory using the LIFO method was $8,200. Monitor's accountant determined that had they used FIFO, the ending inventory would have been $8,500.
a. Determine what the income before taxes would have been had Monitor used the FIFO method of inventory valuation instead of LIFO.
b. What would be the difference in income taxes between LIFO and FIFO, assuming a 30% tax rate?

Quizplus · Accepted Answer

The Answer of Monitor Company uses the LIFO method for valuing its ending inventory. The following financial statement information is available for their first year of operation:  Monitor's ending inventory using the LIFO method was $8,200. Monitor's accountant determined that had they used FIFO, the ending inventory would have been $8,500.
a. Determine what the income before taxes would have been had Monitor used the FIFO method of inventory valuation instead of LIFO.
b. What would be the difference in income taxes between LIFO and FIFO, assuming a 30% tax rate?

Monitor Company Uses the LIFO Method for Valuing Its Ending