Vance Company Reported the Following Summarized Annual Data at the End

question 10

Essay

Vance Company reported the following summarized annual data at the end of 2018: *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 a LIFO basis, the ending inventory would have been $180,000.
Instructions
(a) Restate the summary information on a LIFO basis.
(b) What effect, if any, would the proposed change have on Vance's income tax expense, net income, and cash flows?
(c) If you were an owner of this business, what would your reaction be to this proposed change?

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Definitions:

No-Par Common Stock

Common stock issued without a par value, where the board of directors decides the selling price.

Stated Value

A value assigned to a security or asset which is not determined by market forces.

Shares

Ownership segments in a corporation or financial asset, allowing for an equal share in declared profits, distributed as dividends.

No-Par Common Stock

Equity securities issued without a par value, where the board of directors determines the issuing price.