sailors
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Matt McGowan
10/18/03
AC 201
BYP: 6-7 Inventories
The J.K. Leask Wholesale Corporation uses the LIFO method of inventory costing. In this case the president of the J.K Leask Corporation has asked the plant accountant to recommend to the purchasing department a large purchase of inventory for delivery 3 days before the end of the year. This action will have many affects on the companies income statement for the next couple years and the income tax expense report. First of all by delivering the purchased inventory 3 days before the end of the year, they will show a lesser income because by increasing inventory 3 days before, it will not go on the current income statement. This will be shown on next year income statement. This will to the high income tax rate being taxed on the smaller amount of inventory which will lead to a lower income shown this year, but most likely a much higher income next year. This all depends on the income tax rate at the end of the next year...