Crow Corporation Has Used the LIFO Inventory Method for the Past

question 107

Multiple Choice

Crow Corporation has used the LIFO inventory method for the past 10 years. During that time, the prices Crow pays for the inventory have increased by 50%. Its inventory value when it first adopted LIFO was $5,000,000. The company began using a just-in-time inventory system the same year it adopted LIFO, and although sales have increased, the quantities of goods on hand at year end has not changed in the past ten years. The corporation's marginal tax rate has been 35% in all of the years. As a result of the LIFO election:

• A)The company has deferred $5,000,000 of income tax.
• B)The company has deferred $1,750,000 ($5,000,000 × .35) of income tax.
• C)The LIFO election did not defer any income tax because the quantity of goods on hand has not changed.
• D)The company has deferred $875,000 [(.50)($5,000,000)(.35)] of income tax.
• E)None of the above.

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Definitions:

Adam Smith

An 18th-century Scottish economist known as the father of modern economics, renowned for his theories on free markets and the division of labor.

Scientific Management

A theory of management that analyzes and synthesizes workflows to improve economic efficiency and labor productivity.

Training Costs

Expenses associated with the development and delivery of training programs to employees, aiming at enhancing their skills and knowledge for better job performance.

Employee Aptitudes

The natural talents or abilities that individuals possess, which may influence their performance and roles within a workplace.