Question Details

The accountant at Paige Company is figuring out the difference in income taxes 


1.	In periods of rising prices, the inventory method which results in the inventory value on the statement of financial position that is closest to current cost is the
a.	FIFO method.
b.	specific identification method.
c.	average-cost method.
d.	tax method.

	2.	If companies have identical inventory costs but use different inventory flow assumptions when the price of goods have not been constant, then the
a.	cost of goods sold of the companies will be identical.
b.	cost of goods available for sale of the companies will be identical.
c.	ending inventory of the companies will be identical.
d.	net income of the companies will be identical.
3.	The specific identification method of inventory costing
a.	always maximizes a company's net income.
b.	always minimizes a company's net income.
c.	has no effect on a company's net income.
d.	may enable management to manipulate net income.
	4.	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?
a.	$875.
b.	$375.
c.	$263.
d.	Cannot be determined from the information provided.
	5.	The accountant at Reber Company has determined that income before income taxes amounted to $6,750 using the FIFO costing assumption. If the income tax rate is 30% and the amount of income taxes paid would be $225 greater if the average-cost assumption were used, what would be the amount of income before taxes under the average-cost assumption?
a.	$6,975
b.	$7,500
c.	$6,090
d.	$6,525





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