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?
COGS from LIFO to FIFO:
COGSF = COGSL ? change in LIFO reserve = COGSL - (LIFO reserveE ? LIFO reserveB) = $16,000 ? ($4,000 ? $1,500) = $16,000 ? $2,500 = $13,500
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