Given the following data by how much would taxable incoome change if LIFO is used rather that FIFO
Beg Inv. 3500 unit at 60
units sold 8100
Purchases 6500 units at 70
To calculate the change in taxable income when using LIFO (Last In, First Out) instead of FIFO (First In, First Out), we need to find the value of ending inventory under LIFO and then compare it to the value under FIFO.
First, let's calculate the ending inventory using LIFO.
1. Calculate the cost of the units sold under LIFO:
Under LIFO, the most recent purchases are assumed to be sold first.
Cost of units sold = (8100 units x $70) = $567,000
2. Calculate the remaining inventory under LIFO:
Ending Inventory = Beginning Inventory + Purchases - Units Sold
Ending Inventory = (3500 units x $60) + (6500 units x $70) - 8100 units
Ending Inventory = $210,000 + $455,000 - $567,000
Ending Inventory = $98,000
Now, let's calculate the taxable income difference between LIFO and FIFO.
1. Calculate the cost of goods sold under FIFO:
Under FIFO, the oldest inventory is assumed to be sold first.
Cost of goods sold = (8100 units x $60) + (6500 units x $70) = $486,000 + $455,000 = $941,000
2. Calculate the taxable income under FIFO:
Taxable Income = Sales Revenue - Cost of Goods Sold
Taxable Income = Sales Revenue - $941,000
To find the change in taxable income, we need to compare the taxable income under LIFO and FIFO. This will depend on the sales revenue, which is not provided in the given data. Please provide the sales revenue for a precise answer.