honeycfa

Wallace Lumber uses LIFO and had the following note in its last financial statement: "Wallace Lumber showed a LIFO reserve of $90,000 in 2003 and $86,000 in 2004." Wallace's marginal tax rate is 31%.

If Wallace's year-end LIFO inventory balance was $400,000, their inventory based on FIFO would be:

A) $486,000.

B) $490,000.

C) $314,000.

---

INV_F = INV_L + LIFO reserve

        =$400,000 + $86,000

        = $486,000

---

If Wallace's LIFO COGS were $70,000, their FIFO COGS would be:

A) $74,000.

B) $66,000.

C) $64,000.

---

COGS_F = COGS_L - (LIFO reserve_E - LIFO reserve_B)

            = $70,000 - ($86,000 - $90,000)

            = $74,000

honeycfa

Brigham Corporation uses the last-in, first-out (LIFO) method of accounting for inventory.  For the year 2005, the following is provided:

• Cost of goods sold (COGS): $24,000
• Beginning inventory: $6,000
• Ending inventory: $7,500
• The notes accompanying the financial statements indicate that the LIFO reserve at the beginning of the year was $2,250 and at the end of the year was $6,000

If Brigham had used first-in, first-out (FIFO), the COGS for 2005 would be:

A) $3,750.

B) $20,250.

C) $29,250.

---

FIFO COGS = LIFO COGS ? change in LIFO reserve. Therefore, $24,000 ? ($6,000 ? 2,250) = $20,250.