The UNI Company Balance Sheet As of December 31, 2002 (in millions) 2001 2002 LIFO Inventory 200 180 The UNI Company Income Statement For year ended December 31, 2002 (in millions) Sales $1,000 Cost of goods sold 600 Depreciation 50 Selling, general, and administrative expenses 160 Interest expense 23 Income before taxes $167 Tax 67 Net income $100 Additional information: UNI uses the last in first out (LIFO) inventory valuation method. The LIFO reserve is $20 for 2002 and $10 for 2001. UNI leases equipment. These leases are classified as operating leases and require annual, end-of-year payments of $10 million for each of the next 5 years. The cost of goods sold for 2002 using FIFO inventory valuation is: A) $580 million. B) $600 million. C) $590 million. D) $610 million.
Dang, this isn’t simple for me. My guess would be D
tip: forget the actual calculation for FIFO COGS. If you remember the relation between FIFO COGS and LIFO COGS you should be fine.
I’m getting C
COGS FIFO = COGS LIFO - Change in Lifo Reserve = 600 - 10 = 590 Choice C. Is this a Trick Question??? CP
Oh ok i think it’s C also. For some reason I was thinking that the LIFO reserve was getting smaller calculating to 610, but the reserve is getting larger so C 590
cpk123 - you got it schweser explanation is Purchases = $600 + 180 200 = $580 million Beginning inventory (FIFO) = $200 + 10 = $210 million Ending inventory (FIFO) = $180 + $20 = $200 million COGS (FIFO) = $210 + 580 200 = $590 million Check: FIFO: $210 + 580 = $590 + 200 LIFO: $200 + 580 = $600 + 180 pretty long winded and not necessary if you remember the formula COGS FIFO = COGS LIFO - Change in Lifo Reserve I guess some concepts (without a direct LOS reference in Level 2) do spill over from Level 1 to Level 2
And FIFO inventory is LIFO + LIFO reserve, right?
C. The change in Life reserve is 10 dollars. Pay attention to the years because it is easy to read it quick and think -10.
Anybody remember the adjustment to shareholders equity??
Add the LIFO Reserve to equity as an adjustment to inventory.
ahh yes, thanks. I think you hit it with the tax rate too, any thoughts?
thats in you DTL portion…The amount your inventory changes = LIFO reserve*tax + Lifo reserve(1-tax) can some1 confirm.
I’m guessing we won’t have to know, I’d have to dust off the LI books for that one.