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Reading 36: Inventori LOS g习题精选

LOS g: Calculate adjustments to reported financial statements related to inventory assumptions in order to aid in comparing and evaluating companies.

The Orchard Supply Company uses LIFO inventory valuation. Orchard Supply had a cost of goods sold of $1 million for the period. The inventory at the beginning of the period was $0.5 million, and the inventory at the end of the period was $0.6 million. Orchard Supply's LIFO reserve was $0.1 million for the previous year and $0.2 million for the current year. What is Orchard Supply's ending inventory according to FIFO inventory valuation?

A)
$0.7 million.
B)
$0.8 million.
C)
$0.5 million.



FIFO Inventory = $0.6 + 0.2 = $0.8 million.

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.



INVF = INVL + LIFO reserve

        =$400,000 + $86,000

        = $486,000


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

A)
$66,000.
B)
$64,000.
C)
$74,000.



COGSF = COGSL - (LIFO reserveE - LIFO reserveB)

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

            = $74,000

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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)
$20,250.
B)
$3,750.
C)
$29,250.



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

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GR Corporation uses the last-in, first out (LIFO) method of accounting for inventory and $70,000 is reported as cost of goods sold (COGS) on their income statement. However, if GR had used first-in, first-out (FIFO), the COGS would have been $60,000. If the ending LIFO reserve (LR) reported in the financial statements is $40,000, the beginning LIFO reserve is:

A)
$30,000.
B)
$50,000.
C)
$20,000.


Beginning LR + ΔLR = Ending LR> >

ΔLR = COGS(LIFO) – COGS(FIFO) = $70,000 – 60,000 = $10,000> >

Beginning LR = $40,000 – 10,000 = $30,000> >

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An analyst gathers the following information about a firm:

  • Last in, first out (LIFO) inventory = $10,000
  • Beginning LIFO reserve = $2,500
  • Ending LIFO reserve = $4,000
  • LIFO cost of goods sold = $15,000
  • LIFO net income = $1,500
  • Tax rate is 40%

To convert the financial statements to a FIFO basis, the amount the analyst should add to the stockholders' equity is closest to:

A)
$2,800.
B)
$4,000.
C)
$2,400.


If the firm had used FIFO inventory cost, tax liability would be higher by (LIFO reserve × tax rate) and retained earnings would be higher by [LIFO reserve × (1 ? tax rate)].

(LIFO reserve)(1 ? t) = $4,000(1 ? 0.4) = $2,400

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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)
$26,000.



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

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The formula to convert cost of goods sold (COGS) from last in, first out (LIFO) to first in, first out (FIFO) is:

A)
COGS FIFO = COGS LIFO – change in the LIFO reserve.
B)
COGS FIFO = COGS LIFO + change in the LIFO reserve.
C)
COGS FIFO = COGS LIFO + beginning LIFO reserve.



The formula for converting COGS from LIFO to FIFO is COGSF = COGSL ? (LIFO reserveE ? LIFO reserveB)

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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)
$12,000.
B)
$18,500.
C)
$13,500.



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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First in, first out (FIFO) inventory equals:

A)

LIFO cost of goods sold ? changes in LIFO reserve.

B)

LIFO inventory + LIFO reserve.

C)

the change in LIFO reserve ? LIFO ending reserve.




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

INVF = INVL + LIFO Reserve

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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)
$500.
B)
$4,100.
C)
$2,800.



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

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