# LIFO cogs and LIFO cash flows

In 2004, Torrence Co. had a beginning inventory of \$17,659, and made purchases of \$19,269. If the ending inventory level was \$16,401, what was Cost of Goods Sold for year 2004? What does a relatively high COGS (i.e. use of LIFO during rising prices) say about a company’s cash flows? COGS for 2004 Cash flows A) \$19,269 lower B) \$20,527 lower C) \$19,269 higher D) \$20,527 higher

EI = BI + P - COGS COGS = BI + P - EI COGS = 17659 + 19269 - 16401 = 20527 D? yancey, when a company uses LIFO inventory, the COGS figure is close approximation to it’s economic worth. In case of rising prices, the COGS would be high and in case of falling prices, the COGS would be low. - Dinesh S

Dinesh, that’s right. The cash flows are higher because LIFO has lower taxes. Here is another question. It took me about 7-8 minutes. These schweser questions are time consuming! Pischke Motors provided you with the following financials: Beginning LIFO Reserve \$2,309 Cost of Goods Sold (COGS) using LIFO \$6,160 COGS using FIFO of \$4,351 What is the Ending LIFO reserve? A) \$500. B) \$4,118. C) \$2,309. D) \$2,809.

FIFO(COGS) = LIFO(COGS) - change in LIFO reserve LIFO(COGS) - FIFO(COGS) = LIFO(Reserve-END) - LIFO(Reserve- BEG) LIFO(Reserve-END) = LIFO(COGS) - FIFO(COGS) + LIFO(Reserve- BEG) LIFO(Reserve-END) = 6160 - 4351 + 2309 = 4118 = B?? - Dinesh S

Yes The correct answer was B) \$4,118. Ending LIFO Reserve = (LIFO COGS - FIFO COGS) + Beginning LIFO Reserve = (6,160 - 4,351) + 2,309 = \$4,118 fun stuff

First one. I guess D. Second. B. The question is easy. Or not?