Hammond Company adopted LIFO when it was formed on January 1, 2017. Since then, the company has had the following purchases and sales of its single inventory item: Year Units Purchased Cost per Unit Units Sold Price per Unit 2017 10,000 $5 8,000 $12 2018 12,000 6 9,000 13 2019 15,000 8 14,000 16 In December 2020, the controller realized that because of an unexpected increase in demand, the company had sold 22,000 units but had purchased only 19,000 units during the year. In 2020, each unit had been sold for $19, and each unit purchased had cost $10. The income tax rate is 21%. Required: 1. If Hammond makes no additional purchases in 2020, how much LIFO liquidation profit will it report? $fill in the blank 7a6026fb6f8f01d_1 2. Prepare the appropriate annual report disclosures for 2020. 2020 2019 Inventory at FIFO $fill in the blank b2a8b8fedfc6fff_1 $fill in the blank b2a8b8fedfc6fff_2 Less: LIFO valuation allowance fill in the blank b2a8b8fedfc6fff_3 fill in the blank b2a8b8fedfc6fff_4 Inventory at LIFO $fill in the blank b2a8b8fedfc6fff_5 $fill in the blank b2a8b8fedfc6fff_6 3. If Hammond purchases an additional 7,000 units in December 2020, how much income tax will the company save? $fill in the blank 149705091f86ff4_1

Name: Hammond Company adopted LIFO when it was formed on January 1, 2017. Si
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Description: Hammond Company adopted LIFO when it was formed on January 1, 2017. Since then, the company has had the following purchases and sales of its single inventory item: YearUnits PurchasedCost per UnitUnits SoldPrice per Unit 201710,000$58,000 $122018

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Hammond Company adopted LIFO when it was formed on January 1, 2017. Since then, the company has had the following purchases and sales of its single inventory item:

Year	Units Purchased	Cost per Unit	Units Sold	Price per Unit

2017	10,000	$5	8,000	$12
2018	12,000	6	9,000	13
2019	15,000	8	14,000	16

In December 2020, the controller realized that because of an unexpected increase in demand, the company had sold 22,000 units but had purchased only 19,000 units during the year. In 2020, each unit had been sold for $19, and each unit purchased had cost $10. The income tax rate is 21%.

Required:

1. If Hammond makes no additional purchases in 2020, how much LIFO liquidation profit will it report?

$fill in the blank 7a6026fb6f8f01d_1

2. Prepare the appropriate annual report disclosures for 2020.

	2020	2019
Inventory at FIFO	$fill in the blank b2a8b8fedfc6fff_1	$fill in the blank b2a8b8fedfc6fff_2
Less: LIFO valuation allowance	fill in the blank b2a8b8fedfc6fff_3	fill in the blank b2a8b8fedfc6fff_4
Inventory at LIFO	$fill in the blank b2a8b8fedfc6fff_5	$fill in the blank b2a8b8fedfc6fff_6

3. If Hammond purchases an additional 7,000 units in December 2020, how much income tax will the company save?

$fill in the blank 149705091f86ff4_1

4. If Hammond purchases the additional 7,000 units, how much income tax has the company saved over the 4-year period by using LIFO instead of the FIFO cost flow assumption?

$fill in the blank 6c74d0fee077058_1

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Where did you get the $4 and the $2 from when finding the LIFO liquidation profit?

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