Burnham Company Reported the Following Summarized Annual Data at the End

question 187

Essay

Burnham Company reported the following summarized annual data at the end of 2014: $\begin{array}{lr}\text { Sales revenue } & \$ 1,600,000 \\\text { Cost of goods sold } & 900,000 \\\text { Gross margin } & 700,000 \\\text { Operating expenses } & 400,000 \\\text { Income before income taxes } & 300,000 \\\hline\end{array}$ *Based on an ending FIFO inventory of $250,000.
The income tax rate is 30%. 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 $205,000.
Instructions
(a) Restate the summary information on a LIFO basis.
(b) What effect, if any, would the proposed change have on Burnham'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:

Hostile Work Environment

A workplace situation where an employee experiences harassment or discrimination, making it difficult to work.

Corporate Intelligence

The collection and analysis of information on markets, competitors, customers, and other factors influencing the business environment, aimed at supporting strategic decision-making.

Unethical

Actions or behaviors that are considered wrong or immoral according to societal norms or professional standards.

Conflict Of Interest

A situation where an individual's personal interests potentially interfere with their professional responsibilities or duties.