Reading 35: Analysis of Inventories - LOS c, (Part 1) ～ Q style, following, class, black

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1.Given the following data:

 Beginning LIFO Reserve $2,300

 Cost of Goods Sold (COGS) using LIFO $6,100

 COGS using FIFO of $4,300

What is the Ending LIFO reserve?

A)   $4,100.

B)   $500.

C)   $2,300.

D)   $2,800.

 

2.If a company using last in, first out (LIFO) reports an inventory balance of $22,000 and a LIFO reserve of $4,000, the estimated value for the inventory on a first in, first out (FIFO) basis would be:

A)   $13,000.

B)   $18,000.

C)   $24,000.

D)   $26,000.

3.Given the following data during periods of rising prices and stable or increasing inventory quantities:

 LIFO Inventory = $80,000

 FIFO Inventory = $90,000

 Retained Earnings = $125,000

When adjusting the balance sheet from (LIFO) to (FIFO), approximately what is the percentage change in retained earnings?

A)   8.00%.

B)   -12.50%.

C)   12.50%.

D)   -8.00%.

 

4.First in, first out (FIFO) inventory equals:

A)   LIFO inventory + LIFO reserve.

B)   the change in LIFO reserve - LIFO ending reserve.

C)   LIFO cost of goods sold - changes in LIFO reserve.

D)   LIFO profit + (change in LIFO reserve)(1 - t).

 

5.The year-end financial statements for a firm using last in first out (LIFO) acounting show an inventory level of $5,000, cost of goods sold (COGS) of $16,000, and inventory purchases of $14,500. If the LIFO reserve is $4,000 at year-end and was $1,500 at the beginning of the year, what would the COGS have been using FIFO accounting?

A)   $18,500.

B)   $11,000.

C)   $12,000.

D)   $13,500.

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答案和详解如下：

1.Given the following data:

 Beginning LIFO Reserve $2,300

 Cost of Goods Sold (COGS) using LIFO $6,100

 COGS using FIFO of $4,300

What is the Ending LIFO reserve?

A)   $4,100.

B)   $500.

C)   $2,300.

D)   $2,800.

The correct answer was A)

Ending LIFO Reserve = (LIFO COGS - FIFO COGS) + Beginning LIFO Reserve = (6,100 - 4,300) + 2,300 = $4,100.

 

2.If a company using last in, first out (LIFO) reports an inventory balance of $22,000 and a LIFO reserve of $4,000, the estimated value for the inventory on a first in, first out (FIFO) basis would be:

A)   $13,000.

B)   $18,000.

C)   $24,000.

D)   $26,000.

The correct answer was D)

FIFO INV = LIFO INV + LIFO Reserve
X = 22,000 + 4,000
X = 26,000

3.Given the following data during periods of rising prices and stable or increasing inventory quantities:

 LIFO Inventory = $80,000

 FIFO Inventory = $90,000

 Retained Earnings = $125,000

When adjusting the balance sheet from (LIFO) to (FIFO), approximately what is the percentage change in retained earnings?

A)   8.00%.

B)   -12.50%.

C)   12.50%.

D)   -8.00%.

The correct answer was A)

The difference between the two inventory methods results in a cost of goods sold of $10,000 less using FIFO since the cost of the inventory sold is cheaper than using LIFO during rising prices.  The percentage change in retained earnings = (10,000/125,000) x 100 = 8.00%.

 

4.First in, first out (FIFO) inventory equals:

A)   LIFO inventory + LIFO reserve.

B)   the change in LIFO reserve - LIFO ending reserve.

C)   LIFO cost of goods sold - changes in LIFO reserve.

D)   LIFO profit + (change in LIFO reserve)(1 - t).

The correct answer was A)

To convert LIFO inventory balances to a FIFO basis, simply add the LIFO reserve to the LIFO inventory:

INV_{F  =} INV_L + LIFO Reserve

 

5.The year-end financial statements for a firm using last in first out (LIFO) acounting show an inventory level of $5,000, cost of goods sold (COGS) of $16,000, and inventory purchases of $14,500. If the LIFO reserve is $4,000 at year-end and was $1,500 at the beginning of the year, what would the COGS have been using FIFO accounting?

A)   $18,500.

B)   $11,000.

C)   $12,000.

D)   $13,500.

The correct answer was D)   

COGS from LIFO to FIFO:

COGS_F = COGS_L - change in LIFO reserve
= COGS_L - (LIFO reserve_E - LIFO reserve_B)
= $16,000 - ($4,000-$1,500)
= $16,000 - $2,500
= $13,500