Taj Mahal Inc. uses the periodic inventory system and FIFO costing. For the year ending December 31, 2014, the company's cost of goods sold was Rs20,670,000. Had the LIFO cost flow assumption been used, cost of goods sold would have been Rs21,244,000. Assuming a 25% tax rate, what would be the tax savings if Taj Mahal were allowed to use LIFO?
A) Rs0.
B) Rs143,500.
C) Rs574,000.
D) cannot be determined from the information given.

Question

Quizplus · Accepted Answer

The tax savings would be Rs143,500, which is the difference between the cost of goods sold under FIFO and LIFO multiplied by the tax rate.