The accountant at Almira Company is figuring out the difference in income taxes the company will pay depending on the choice of either FIFO or LIFO as an inventory costing method. The tax rate is 30% and the FIFO method will result in income before taxes of $8,190. The LIFO method will result in income before taxes of $7,290. What is the difference in tax that would be paid between the two methods?
A) $270.
B) $630.
C) $900.
D) Cannot be determined from the information provided.

Question

Quizplus · Accepted Answer

FIFO income before taxes is $900 higher than LIFO income before taxes. The tax rate is 30%, so the difference in tax that would be paid between the two methods is $900 * 0.30 = $270.

The Accountant at Almira Company Is Figuring Out the Difference