Question

A physical inventory on December 31 shows 3,000 units on hand. Henri sells the units for $12 each. The company has an effective tax rate of 20%. Henri uses the periodic inventory method. What is the difference in taxes if LIFO rather than FIFO is used?

Answer 1

Answer:

Lifo in inflationary- condition Income tax shows minimum amount, when there is inflation in the economy.

Fifo In inflationary condition, income tax shows a higher amount.

Lifo .in deflation .In case of deflation, larger amount of income tax is shown. Fifo  in deflation .Reduced income tax will be shown in deflationary conditions

Explanation:

Lifo in inflationary- condition Income tax shows minimum amount, when there is inflation in the economy.

Fifo In inflationary condition, income tax shows a higher amount.

Lifo .in deflation .In case of deflation, larger amount of income tax is shown. Fifo  in deflation .Reduced income tax will be shown in deflationary conditions.