# LIFO/FIFO

So, still having trouble on the basics: COGS fifo = COGS lifo - change in LIFO reserve (if the change in LIFO reserve decreases, otherwise you add right?)…or do I have this backwards? Ending balance of FIFO = LIFO inventory + ending balance in LIFO reserve Am I right?

FIFO COGS = LIFO COGS - (ending LIFO reserve - beg LIFO reserve) so if LIFO reserves decrease (makes the bracket part of the above equation negative) you end up adding the difference to the COGS…This is because if you are decreasing the LIFO reserve, and prices are rising, you are using up the older investory, i.e. less costly, inventory…so we would have to increase the COGS to make is comparable to FIFO COGS… Does that help? Ending inventory equation is correct as written…

yes, thank you!

these are the following things I keep in mind. Basic eq z) End Inv = Beg Inv + Purchase - COGS (the above equation stays the same for all inventory methods) Assuming all prices are rising or stable, a) Ending Inv (fifo) = End Inv (lifo) + End Lifo reserve; b) COGS (fifo) = COGS (lifo) - (Ending Lifo reserve - Beginning Lifo reserve) c) Purchase (fifo) = purchase (lifo) e) COGS (lifo) = COGS (fifo) + (Beg Inf (fifo) x inflation rate) where Inflation rate = (Ending Lifo reserve - Beginning lifo reserve) / Beg Inv (fifo) g) Beg Inv (fifo) = Beg Inv (lifo) + Beg Lifo reserve be ready to compute, a to g, and then plug those into z for the exam. either you commit them to memory, or you understand the concepts behind them, i’d go with latter but may take you more time to do a problem on exam. it took myself a long freaking time to figure this out. Keep practising it should become natural.