vickyg
Nov 17, 2011, 08:41 PM
Sales revenue $1,000,000
Cost of goods sold 600,000
Gross margin 400,000
Operating expenses 250,000
Income before income taxes $150,000
*based on an ending FIFO inventory of $250,000
The income tax rate is 40%. The controller of the company is considering a switch from FIFO to LIFO. He has determined that on LIFO basis, the ending inventory would have been $180,000.
What effect, if any, would the proposed change have on income tax expense? Net income? Cash flow?
Cost of goods sold 600,000
Gross margin 400,000
Operating expenses 250,000
Income before income taxes $150,000
*based on an ending FIFO inventory of $250,000
The income tax rate is 40%. The controller of the company is considering a switch from FIFO to LIFO. He has determined that on LIFO basis, the ending inventory would have been $180,000.
What effect, if any, would the proposed change have on income tax expense? Net income? Cash flow?