Franco Company Uses the FIFO Inventory Method

question 138

Multiple Choice

Franco Company uses the FIFO inventory method.Its 2010, the company reported net income of €840,000.Had average-cost been used, the company would have reported net income of €760,000.Assuming a 40% tax rate, what is the impact of the inventory cost flow assumption on Franco's taxes for 2010?

• A)Franco would pay €32,000 more in taxes for 2010 as a result of using FIFO inventory method rather than average-cost.
• B)Franco would pay €48,000 less in taxes for 2010 as a result of using FIFO inventory method rather than average-cost.
• C)the inventory method does not impact the amount of income tax paid.
• D)not determinable without income before taxes.