- P8 7 Lo 3 Groupwork Financial Statement Effects Of Fifo And Lifo The Management Of Tritt Company Has Asked Its Accou 1 (107.16 KiB) Viewed 12 times
P8.7 (LO 3) Groupwork (Financial
Statement Effects of FIFO and LIFO) The management of Tritt
Company has asked its accounting department to describe the effect upon the
company's financial position and its income statements of accounting for inventories on the LIFO rather than the FIFO basis during 2020 and 2021. The accounting department is to assume that the change to LIFO would have been effective on January 1, 2020, and that the initial LIFO base would have been the inventory value on December 31, 2019. The following are the
company's financial statements and other data for the years 2020 and 2021 when the FIFO method was employed. Financial Position as of Cash Accounts receivable Inventory Other assets Total assets Accounts payable Other liabilities Sales revenue Less: Cost of goods sold Other expenses Common stock Retained earnings 140,000 Total liabilities and equity $450,000 Income before income taxes Income taxes (40%) 12/31/19 $ 90,000 80,000 Net income 120,000 160,000 $450,000 $ 40,000 70,000 200,000 12/31/20 $130,000 100,000 140,000 170,000 $540,000 $ 60,000 80,000 200,000 200,000 $540,000 Income for Years Ended 12/31/20 $900,000 12/31/21 $154,000 120,000 176,000 200,000 $650,000 $ 80,000 505,000 205,000 710,000 190,000 76,000 $114,000 110,000 200,000 260,000 $650,000 12/31/21 $1,350,000 756,000 304,000 1,060,000 290,000 116,000 $ 174,000
Other data: 1. Inventory on hand at December 31, 2019, consisted of 40,000 units valued at $3.00 each. 2. Sales (all units sold at the same price in a given year): 2020 150,000 units @ $6.00 each 2021-180,000 units @$7.50 each 3. Purchases (all units purchased at the same price in given year): 2020 150,000 units @ $3.50 each 4. Income taxes at the effective rate of 40% are paid on December 31 each year. Instructions Name the account(s) presented in the financial statements that would have different amounts for 2021 if LIFO rather than FIFO had been used, and state the new amount for each account that is named. Show computations. (CMA adapted) 2021-180,000 units @$4.40 each