Calculate taxable income and taxes payable by sonics inc

Reference no: EM131988366

Problem

Suppose Sonics Inc, just started a business this period. The firm purchased 400 units during the period at various prices as follows:

January - 400 units, unit cost - $10, March - 100 units, unit cost - $12, June - 100 units, unit cost - $14, October - 100 units, unit cost - $15.

The firm sold 250 units at $30 each. February - 75 units, selling price - $30, May - 90 units, selling price - $30, August - 75 units, selling price - $30 and December - 10 units, selling price - $30,

Required (assume the firm faces a marginal tax rate of 35%).

a) Calculate taxable income and taxes payable assuming the firm uses FIFO for inventory costing purposes.

b) Calculate taxable income and taxes payable assuming the firm uses LIFO for inventory purposes.

Discuss your results, including any nontax costs that might be associated with either inventory costing system.

Reference no: EM131988366

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