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Permion Inc. uses the perpetual inventory system. All sales are made on account. The following data are taken from the company’s for the year ended December 31, 2018:
Required:
- Show the journal entries to record the December 31 sale under a) FIFO and b) weighted average inventory cost flow assumptions.
- Which method maximizes ending inventory value? Why?
- Assume that income taxes expense is calculated at 50 per cent of income before income taxes. Would more income taxes be payable under the FIFO or weighted average assumption? Explain why.
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