The management of Tritt Company has asked its accounting department to describe
ID: 2417107 • Letter: T
Question
The management of Tritt Company has asked its accounting department to describe the effect upon the company’s financial position and its income statements of accounting for inventories on the LIFO rather than the FIFO basis during 2014 and 2015. The accounting department is to assume that the change to LIFO would have been effective on January 1, 2014, and that the initial LIFO base would have been the inventory value on December 31, 2013. Presented below are the company’s financial statements and other data for the years 2014 and 2015 when the FIFO method was employed.
Financial Position as of
12/31/13
12/31/14
12/31/15
Income for Years Ended
12/31/14
12/31/15
Other data:
Name the account(s) presented in the financial statements that would have different amounts for 2015 if LIFO rather than FIFO had been used, and state the new amount for each account that is named
Financial Position as of
12/31/13
12/31/14
12/31/15
Cash $ 91,490 $131,110 $155,320 Accounts receivable 81,540 101,260 121,910 Inventory 121,910 141,520 177,840 Other assets 161,580 171,720 201,810 Total assets $456,520 $545,610 $656,880 Accounts payable $ 41,510 $ 61,380 $ 81,540 Other liabilities 71,750 80,610 112,350 Common stock 201,810 201,810 201,810 Retained earnings 141,450 201,810 261,180 Total liabilities and equity $456,520 $545,610 $656,880Explanation / Answer
The accounts in the financial statements which will have different amounts had LIFO been used instead of FIFO for accounting of Inventory in 2015 are : (i) Cost of Goods Sold (ii) Inventory (iii) Income before Income Taxes (iv) Income Taxes (v) Retained Earning - Net Income transferred (All amounts in $) Closing Stock in 2015 Qty Rate/Unit $ Value $ Opening Stock as on 1 January 2014 48500 3.42 165870 Purchases in 2014 158500 3.99 632415 207000 798285 Sales in 2014 158500 3.99 632415 Closing Stock as on 31 December 2014 48500 165870 Purchases in 2015 188500 5.02 946270 237000 1112140 Sales in 2015 188500 5.02 946270 Closing Stock as on 31 December 2015 48500 165870 Cost of Goods Sold in 2015 Opening Stock in 2015 165870 Purchases in 2015 946270 Less : Closing Stock in 2015 -165870 Cost of Goods Sold 946270 Income Before Income Taxes in 2015 and Net Income for 2015 (trfd to Retained Earnings) Sales 1613560 Cost of Goods Sold 946270 Other Expenses 305000 1251270 Income Before Income Taxes 362290 Income Tax @ 40% 144916 Net Income transferred to Retained Earnings 217374
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