Eleanor Copy Center sells laser printers and supplies. Eleanor Copy Center started the year with 90 containers of ink (average cost of $8.50 each, FIFO cost $8.90 each, LIFO cost of $7.80 each). During the year, Eleanor Copy Center purchased 720 containers of ink at $10.30 and sold 580 units for $19.75 each. Eleanor Copy Center paid operating expenses throughout the year, a total of $4,100. Eleanor Copy Center's income statement- excluding the effects of income tax under each of the average-cost, FIFO, and LIFO inventory costing methods-is given. Eleanor Copy Center is a corporation subject to a 25% income tax. Compute Eleanor Copy Center's income tax expense under the average, FIFO, and LIFO inventory costing methods. Which method would you select to (A) maximize income before tax and (B) minimize income tax expense? (See Chart) minimize Income tax expense? (Round your answer to the nearest Whole dollar.) FIFO Sales revenue Average Cost $ 11,455 $ 5,858 L IFO 11,455 $ 11,455 5,848 5,974 Cost of goods sold Gross profit $ 5,597 4,100 Operating expenses 5,607 $ 5,481 4,100 4,100 1,507 $ 1,381 Net income before tax 1,497 $ Income tax expense Enter any number in the edit fields and then click Check Answer.

Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks! Average Cost Method FIFO Method Cost of Goods sold LIFO Method Cost of Goods sold Date No. of Units Cost per unit Inventory Value Date No.Of Units Cost per unit Inventory Value Date No. of Units Cost per unit Inventory Value Beginning 90.00 8.50 765.00 Beginning 90.00 8.90 801.00 Purchased 580.00 10.30 5,974.00 Purchased 720.00 10.30 7,416.00 Purchased 490.00 10.30 5,047.00 Total 810.00 10.10 8,181.00 Goods sold 580.00 10.10 5,858.00 Total 580.00 5,848.00 Total 580.00 5,974.00 Sale Value No. of Units Cost per unit Sale Value 580.00 19.75 11,455.00 Income Statement Average Cost FIFO LIFO Sales Revenue 11,455.00 11,455.00 11,455.00 Less: Cost of Goods sold 5,858.00 5,848.00 5,974.00 Gross Profit 5,597.00 5,607.00 5,481.00 Less: Operating Expense 4,100.00 4,100.00 4,100.00 Net Income before tax 1,497.00 1,507.00 1,381.00 Income tax @ 25% 374.00 377.00 345.00 Answer a Net Income before tax is highest in FIFO. So FIFO method maximizes income before tax. Answer b income tax expense is lowest in LIFO. So LIFO method minimizes income tax. .

Eleanor Copy Center sells laser printers and supplies…

Answers

Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks!

Average Cost Method

FIFO Method

Cost of Goods sold

LIFO Method

Cost of Goods sold

Date

No. of Units

Cost per unit

Inventory Value

Date

No.

Of Units

Cost per unit

Inventory Value

Date

No. of Units

Cost per unit

Inventory Value

Beginning

90.00

8.50

765.00

Beginning

90.00

8.90

801.00

Purchased

580.00

10.30

5,974.00

Purchased

720.00

10.30

7,416.00

Purchased

490.00

10.30

5,047.00

Total

810.00

10.10

8,181.00

Goods sold

580.00

10.10

5,858.00

Total

580.00

5,848.00

Total

580.00

5,974.00

Sale Value
No. of Units	Cost per unit	Sale Value
580.00	19.75	11,455.00

Income Statement	Average Cost	FIFO	LIFO
Sales Revenue	11,455.00	11,455.00	11,455.00
Less: Cost of Goods sold	5,858.00	5,848.00	5,974.00
Gross Profit	5,597.00	5,607.00	5,481.00
Less: Operating Expense	4,100.00	4,100.00	4,100.00
Net Income before tax	1,497.00	1,507.00	1,381.00
Income tax @ 25%	374.00	377.00	345.00

Answer a

Net Income before tax is highest in FIFO. So FIFO method maximizes income before tax.

Answer b

income tax expense is lowest in LIFO. So LIFO method minimizes income tax.

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