Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Chapter 10, Problem 10.3P
LIFO, Conversion to FIFO. The Outsider Company, Inc. provided the following information regarding its inventory for the year ended December 31, 2019. It made all of the purchases before it had any sales transactions for the year.
| Description | LIFO | FIFO | ||
| Beginning inventory; | 8,000@ $6 | $48,000 | 4,000 @ $7 | $ 28,000 |
| January 1, 2010 | 8,000 @ $7 | 56,000 | 12,000 @ $8 | 96,000 |
| Total beginning inventory | 16,000 units | $ 104,000 | 16,000 units | $124,000 |
| Purchases | 14,000@ $9 | 126,000 | 14,000 @$9 | 126,000 |
| Cost of goods available | 30,000 units | $ 230,000 | 30,000 units | $250,000 |
| Ending inventory | 6,000 @ $8 | 36,000 | 6,000 @ $9 | 54,000 |
| Cost of goods sold | 24,000 units | $ 194,000 | 24,000 units | $196,000 |
Required
- a. Compute the LIFO reserve at the beginning of the year (i.e., at December 31, 2018).
- b. Compute the LIFO reserve at the end of the year (i.e., at December 31, 2019)
- c. Illustrate how the firm can use the LIFO reserve to convert ending inventory from the LIFO to the FIFO basis for Doth years (i.e., 2018 and 2019).
- d. Illustrate how the firm can use the LITO reserve to convert the LIFO cost of goods sold to the FIFO cost of goods sold for 2019
- e. Describe the conditions that indicate that there is a LIFO liquidation tor 2019.
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Chapter 10 Solutions
Intermediate Accounting (2nd Edition)
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