Using the following data, by how much would taxable income change if FIFO is used rather than LIFO?
Beginning inventory 4000 units at $43
Purchases 7000 units at $53
Units sold 8000
A) Decrease by $30,000.
B) Decrease by $80,000.
C) Increase by $30,000.
D) Increase by $80,000.
C
Explanation: C)
LIFO 7000 units × $53 = $371,000
COGS 1000 units × $43= 43,000
8000 units $414,000
FIFO 4000 units × $43 = $172,000
COGS 4000 units × $53 = $212,000
8000 $384,000
Difference $30,000
Business
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