The ending LIFO reserve is $70 and the beginning LIFO reserve is $80.

FIFO COGS = LIFO COGS ? (ending LIFO reserve ? beginning LIFO reserve)

$800 ? ($70 ? $80) = $810

Declining prices (negative LIFO reserve) would result in FIFO inventory being less than LIFO inventory based on the following equation:

FIFO inventory = LIFO inventory + LIFO reserve

The balance sheet adjustment would decrease assets (inventory) by the $20 LIFO reserve. In addition, the analyst would decrease liabilities by $7 ($20 LIFO reserve × 35% tax rate). To bring the accounting equation into balance, the analyst would decrease shareholders’ equity by $13 [$20 LIFO reserve × (1 ? 35% tax rate)].