FIFO method works on the principle that goods that are bought first (old products) will be sold first and LIFO follows that good that came at last will be sold first. LIFO is used by fewer companies as goods that are older are sold first which is done in FIFO method. To identify: FIFO and LIFO method.

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Answer 1

Question

Chapter 5, Problem 22QS

(a)

To determine

Introduction: FIFO method works on the principle that goods that are bought first (old products) will be sold first and LIFO follows that good that came at last will be sold first. LIFO is used by fewer companies as goods that are older are sold first which is done in FIFO method.

To identify: FIFO and LIFO method.

(b)

To determine

Introduction: The price of the inventory affects the net income which lead to tax effects. If an inventory is overvalued it will increase the profit which thereby increases the tax liability.

To identify: FIFO and LIFO method.

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Required Answer each of the following questions by providing supporting computations. 1. Assume that the company’s income tax rate is 30% for all items. Identify the tax effects and after-tax amounts of the three items labeled pretax. 2. Compute the amount of income from continuing operations before income taxes. What is the amount of the income tax expense? What is the amount of income from continuing operations? 3. What is the total amount of after-tax income (loss) associated with the discontinued segment? 4. What is the amount of net income for the year?

Marginal tax rates Using the tax rate schedule given here, perform the following: a. Find the marginal tax rate for the following levels of sole proprietorship earnings before taxes: $14,700; $59,500; $89,600; $156,000; $247,000; $456,600; and $1 million. b. Plot the marginal tax rates (measured on the y-axis) against the pretax income levels (measured on the x-axis).

Marginal tax rates Using the tax rate schedule attached Perform the following: a. Find the marginal tax rate for the following levels of sole proprietorship earnings before taxes: $16,800; $59,500; $89,600; $151,000; $245,000; $451,200; $1,000,000 b. Plot the marginal tax rates (measured on the y-axis) against the pretax income levels (measured on the x-axis).

Answer 2

Question

Chapter 5, Problem 22QS

(a)

To determine

Introduction: FIFO method works on the principle that goods that are bought first (old products) will be sold first and LIFO follows that good that came at last will be sold first. LIFO is used by fewer companies as goods that are older are sold first which is done in FIFO method.

To identify: FIFO and LIFO method.

(b)

To determine

Introduction: The price of the inventory affects the net income which lead to tax effects. If an inventory is overvalued it will increase the profit which thereby increases the tax liability.

To identify: FIFO and LIFO method.

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Answer 3

Question

Chapter 5, Problem 22QS

(a)

To determine

Introduction: FIFO method works on the principle that goods that are bought first (old products) will be sold first and LIFO follows that good that came at last will be sold first. LIFO is used by fewer companies as goods that are older are sold first which is done in FIFO method.

To identify: FIFO and LIFO method.

(b)

To determine

Introduction: The price of the inventory affects the net income which lead to tax effects. If an inventory is overvalued it will increase the profit which thereby increases the tax liability.

To identify: FIFO and LIFO method.

Expert Solution & Answer

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Answer 4

Question

Chapter 5, Problem 22QS

(a)

To determine

Introduction: FIFO method works on the principle that goods that are bought first (old products) will be sold first and LIFO follows that good that came at last will be sold first. LIFO is used by fewer companies as goods that are older are sold first which is done in FIFO method.

To identify: FIFO and LIFO method.

(b)

To determine

Introduction: The price of the inventory affects the net income which lead to tax effects. If an inventory is overvalued it will increase the profit which thereby increases the tax liability.

To identify: FIFO and LIFO method.

Expert Solution & Answer

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Answer 5

Chapter 5, Problem 22QS

(a)

To determine

Introduction: FIFO method works on the principle that goods that are bought first (old products) will be sold first and LIFO follows that good that came at last will be sold first. LIFO is used by fewer companies as goods that are older are sold first which is done in FIFO method.

To identify: FIFO and LIFO method.

(b)

To determine

Introduction: The price of the inventory affects the net income which lead to tax effects. If an inventory is overvalued it will increase the profit which thereby increases the tax liability.

To identify: FIFO and LIFO method.

Answer 6

Chapter 5, Problem 22QS

(a)

To determine

Introduction: FIFO method works on the principle that goods that are bought first (old products) will be sold first and LIFO follows that good that came at last will be sold first. LIFO is used by fewer companies as goods that are older are sold first which is done in FIFO method.

To identify: FIFO and LIFO method.

Answer 7

Chapter 5, Problem 22QS

(a)

To determine

Introduction: FIFO method works on the principle that goods that are bought first (old products) will be sold first and LIFO follows that good that came at last will be sold first. LIFO is used by fewer companies as goods that are older are sold first which is done in FIFO method.

To identify: FIFO and LIFO method.

Answer 8

(b)

To determine

Introduction: The price of the inventory affects the net income which lead to tax effects. If an inventory is overvalued it will increase the profit which thereby increases the tax liability.

To identify: FIFO and LIFO method.

Answer 9

(b)

To determine

Introduction: The price of the inventory affects the net income which lead to tax effects. If an inventory is overvalued it will increase the profit which thereby increases the tax liability.

To identify: FIFO and LIFO method.

Answer 10

Expert Solution & Answer

Answer 11

Expert Solution & Answer

Answer 12

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Answer 13

Ch. 5 - Prob. 1QS Ch. 5 - Prob. 2QS Ch. 5 - Prob. 3QS Ch. 5 - Prob. 4QS Ch. 5 - Perpetual: Inventory costing with FIFO P1 A...Ch. 5 - Prob. 6QS Ch. 5 - Prob. 7QS Ch. 5 - Prob. 8QS Ch. 5 - Prob. 9QS Ch. 5 - A Periodic: Inventory costing with weighted...

Introduction: The price of the inventory affects the net income which lead to tax effects. If an inventory is overvalued it will increase the profit which thereby increases the tax liability. To identify: FIFO and LIFO method.

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Chapter 5 Solutions

Introduction: The price of the inventory affects the net income which lead to tax effects. If an inventory is overvalued it will increase the profit which thereby increases the tax liability.

To identify: FIFO and LIFO method.