A. What amount of ending inventory would be reported in the most recent year if

Question

A. What amount of ending inventory would be reported in the most recent year if the company only used FIFO?

B. What is the COGS reported by the company for the most recent year?

C. What is COGS if the company used only FIFO for both recent year and previous year?

D. Why did management choose LIFO for certain of inventories?

2016 2017 3,843 4,397 Raw materials, work-in-process, and supplies Finished products Total inventories under FIFO LIFO adjustment 5,943 9,786 (888) 6,779 11,176 (899) 10,277 Total inventories 8,898$

Explanation / Answer

A) If the company only used FIFO, then in 2017, ending inventory will be amount that is given in total inventory value under FIFO, that is $11176

B) Cost of the goods sold in 2017 = Ending inventory in 2017 - Ending inventory in 2016

= $10277 - $8898 = $1379

C) If the company used only FIFO for both recent year and previuos year then cost of the goods sold will be :

Cost of the goods sold (under FIFO) in 2017 = Ending inventory as per FIFO in 2017 - Ending inventory as per FIFO in 2016

= $11176 - $9786 = $1390

D) Management choose LIFO for certain inventories because there should be higher cost or rising prices for those inventories and management may have wanted to show lesser net income thereby reducing income tax liability or some other reason.. Because, if valuation is done on LIFO baisis, then cost of the goods sold increases and net income gets reduced.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.