Taylor Corporation reports inventory and cost of goods soldbased on calculations from a LIFO periodic inventory system. Thecompany’s records under this system reveal the following inventorylayers at the beginning of 2021 (listed in chronological order ofacquisition):
|
| 10,000 units @ $15 | $ | 150,000 | |
| 15,000 units @ $20 | | 300,000 | |
| Beginning inventory | $ | 450,000 | |
|
During 2021, 30,000 units were purchased for $25 per unit. Due tounexpected demand for the company’s product, 2021 sales totaled40,000 units at various prices, leaving 15,000 units in endinginventory.
Required:
1. Calculate the amount to report for cost ofgoods sold for 2021.
2. Determine the amount of LIFO liquidation profitthat the company must report in a disclosure note to its 2021financial statements. Assume an income tax rate of 25%.
3. If the company decided to purchase anadditional 10,000 units at $25 per unit at the end of the year, howmuch income tax currently payable would be saved?
