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?

Question

Quizplus · Accepted Answer

The difference in income before taxes between the two methods is:

$8,190 - $7,290 = $900

Therefore, the difference in tax that would be paid is:

$900 x 0.30 = $270

So the best choice would be to use the FIFO method, as it results in a higher income before taxes and therefore a lower amount of taxes to be paid.

The Accountant at Almira Company Is Figuring Out the Difference