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The accountant at patton company has determined that income before income taxes amounted to $11,000 using the fifo costing assumption. if the income tax rate is 30% and the amount of income taxes paid would be $600 greater if the lifo assumption were used, what would be the amount of income before taxes under the lifo assumption? $11,600 $13,000 $9,000 $10,400

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talkingturkey
Given:
Income before income taxes under fifo costing : $11,000
Income tax rate: 30%
Income tax paid under lifo costing: $600

Amount of income before taxes under lifo method is $13,000

600 / 30% = 2,000
2000 + 11,000 = 13,000

FIFO means first-in; first-out. LIFO means Last-in,First-out. These methods are used in accounting for inventories. It affects the amount that reflects on the cost of goods sold portion of the income statement. FIFO costing is used to maximize income values in Financial statements while LIFO costing is used for tax accounting purposes to minimize tax obligations. 

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