Question - Taylor Corporation has used a periodic inventory system and the LIFO cost method since its inception in 2004. The company began 2011 with the following inventory layers (listed in chronological order of acquisition):
8,500 units @ $15 $ 127,500
16,000 units @ $17 272,000
Beginning inventory $ 399,500
During 2011, 32,500 units were purchased for $27 per unit. Due to unexpected demand for the company's product, 2011 sales totaled 41,000 units at various prices, leaving 16,000 units in ending inventory.
Required:
(1) Calculate cost of goods sold for 2011.
(2) Determine the amount of LIFO liquidation profit that the company must report in a disclosure note to its 2011 financial statements. Assume an income tax rate of 40%.
(3) If the company decided to purchase an additional 41,000 units at $27 per unit at the end of the year, how much income tax currently payable would be saved?