Monitor Company Uses the LIFO Method for Valuing Its Ending

question 185

Essay

Monitor Company uses the LIFO method for valuing its ending inventory.The following financial statement information is available for their first year of operation:
$\begin{array}{c} \text { Monitor Company}\\ \text { Income Statement}\\ \text { For the year ended December 31}\\\begin{array}{|l|r|}\hline \text { Sales }& \$ 50,000 \\\hline \text { Cost of goods sold } \quad \quad \quad \quad \quad \quad \quad \quad& 23,000 \\\hline \text { Gross profit } & \$ 27,000 \\\hline \text { Expenses } & \underline{13,000} \\\hline \text { Income before taxes } & \$ 14,000\\\hline \end{array}\end{array}$
Monitor's ending inventory using the LIFO method was $8,200.Monitor's accountant determined that had they used FIFO,the ending inventory would have been $8,500.
a. Determine what the income before taxes would have been, had Monitor used the FIFO method of inventory valuation instead of LIFO
b. What would be the difference in income taxes between LIFO and FIFO, assuming a 30% tax rate?

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Definitions:

Oval Window

A membrane-covered opening that leads from the middle ear to the vestibule of the inner ear, where sound vibrations are transmitted.

Cochlea

A spiral-shaped, fluid-filled organ in the inner ear that is responsible for converting sound vibrations into nerve impulses that the brain can interpret as sound.

Inner Ear

The inner ear is the deepest part of the ear, containing the cochlea, vestibule, and semicircular canals, which are crucial for hearing and balance.

Hertz

The unit of frequency in the International System of Units (SI), defined as one cycle per second.