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Homework answers / question archive / Esquire Inc uses the LIFO method to report its inventory
Esquire Inc uses the LIFO method to report its inventory. Inventory at January 1, 2021, was $888.000 (37.000 units at $24 each). During 2021, 114,000 units were purchased, all at the same price of $29 per unit. 117.000 units were sold during 2021 Assuming an income tax rate of 25%, what is LIFO liquidation profit or loss that the company would report in a disclosure note accompanying its financial statements? LIFO liquidation profil loss)
ANSWER:
Units liquidated 3,000
Difference in cost ($29 – $24) × $5
Before-tax LIFO liquidation profit $15,000
Tax effect ($15,000 × 25%) (3,750)
LIFO liquidation profit $11,250
