Question Details

Breguet Company uses the FIFO inventory 


1.	In a period of falling prices, which inventory method would result in the lowest tax burden?
a.	Average-cost.
b.	FIFO.
c.	No difference.
d.	Cannot be determined.

2.	Henri Company uses the average-cost inventory method. Its 2010 ending inventory was €40,000, but it would have been €60,000 if FIFO had been used. Thus, if FIFO had been used, Henri- income before income taxes would have been
a.	€20,000 greater.
b.	€20,000 less.
c.	the same.
d.	not determinable without the tax rate.

3.	Franco Company uses the FIFO inventory method. Its 2010, the company reported net income of €840,000. Had average-cost been used, the company would have reported net income of €760,000. Assuming a 40% tax rate, what is the impact of the inventory cost flow assumption on Franco's taxes for 2010?
a.	Franco would pay €32,000 more in taxes for 2010 as a result of using FIFO inventory method rather than average-cost.
b.	Franco would pay €48,000 less in taxes for 2010 as a result of using FIFO inventory method rather than average-cost.
c.	the inventory method does not impact the amount of income tax paid.
d.	not determinable without income before taxes.

4.	Breguet Company uses the FIFO inventory method. The company reported inventory of CHF2,230,000 on its December 31, 2011 statement of financial position. Had average-cost been used, the company would have reported inventory of CHF1,860,000. The company's tax rate is 30% what is the impact of the inventory cost flow assumption on Breguet's 2011 financial statements?
a.	Income before taxes reported by Breguet would be CHF370,000 lower as a result of using the FIFO cost flow assumption.
b.	Breguet would pay CHF111,000 less in taxes for 2011 as a result of using the FIFO cost flow assumption.
c.	Income after taxes reported by Breguet would be CHF259,000 higher as a result of using the FIFO cost flow assumption.
d.	The only financial statement affected by the cost flow assumption is the statement of financial position, which would report CHF370,000 more in inventory as a result of using the FIFO cost flow assumption.

5.	Aiwa Inc. uses the average-cost inventory method. Its 2011, the company reported net income of ¥59,800,000. Had average-cost been used, the company would have reported net income of ¥58,900,000. Assuming a 25% tax rate, what is the impact of the inventory cost flow assumption on Aiwa's taxes for 2011?
		a.	Aiwa would pay ¥225,000 less in taxes for 2011 as a result of using the average-cost inventory method rather than FIFO.
		b.	Aiwa would pay ¥675,000 less in taxes for 2011 as a result of using the average-cost inventory method rather than FIFO.
		c.	the inventory method does not impact the amount of income tax paid.
		d.	not determinable without income before taxes.




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