The accountant at Paige Company is figuring out the difference in income taxes the company will pay depending on the choice of either FIFO or average-cost as an inventory costing method.The tax rate is 30% and the FIFO method will result in income before taxes of $9,100.The average-cost method will result in income before taxes of $8,225.What is the difference in tax that would be paid between the two methods?

Question

Quizplus · Accepted Answer

The difference in income before taxes between FIFO and average-cost is $9,100 - $8,225 = $875. The difference in tax is $875 * 30% = $262.50, which rounds to $263.

The Accountant at Paige Company Is Figuring Out the Difference