honeycfa

If a firm has a first in, first out (FIFO) inventory of 9,000 and a last in, first out (LIFO) inventory of 6,500, what is the value of the LIFO reserve assuming a 40% tax rate?

A) $2,500.

B) $1,500.

C) $1,000

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LIFO reserve = FIFO inventory ? LIFO inventory = 9,000 ? 6,500 = 2,500

honeycfa

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.

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

INV_F = INV_L + LIFO Reserve

honeycfa

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.

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

honeycfa

The following information has been gathered about a firm:

• 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%

What is the FIFO COGS?

A) $16,500.

B) $13,500.

C) $11,000.

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FIFO COGS = LIFO COGS – change in LIFO reserve

= $15,000 – (4,000 ? 2,500) = $13,500

honeycfa

The formula to convert an ending inventory value from the LIFO to the FIFO method is to:

A) FIFO inventory = LIFO inventory ? LIFO reserve.

B) FIFO inventory = LIFO inventory × LIFO reserve.

C) FIFO inventory = LIFO inventory + LIFO reserve.

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The formula to convert an ending inventory value from the LIFO to the FIFO method is to FIFO inventory = LIFO inventory + LIFO reserve.

honeycfa

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.

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

honeycfa

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.

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The formula for converting COGS from LIFO to FIFO is COGS_F = COGS_L ? (LIFO reserve_E ? LIFO reserve_B)

honeycfa

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.

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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

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) $20,250.

B) $3,750.

C) $29,250.

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

honeycfa

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.

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Beginning LR + ΔLR = Ending LR> >

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

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