K. Co. uses LIFO inventory method. At the end of the 2006 accounting period, the company reported $10,000 of net earnings on I/S. The inventory balance on the 2006 B/S is $7,000. In the footnotes, LIFO reserve at the end of 2006 is $3,000 and LIFO reserve at the end of 2005 is $2,500. JJ Co. uses FIFO and reported 10,300 of net earnings on the 2006 I/S. Which company has a higher earnings if both of the companies would use the same inventory method?

K. Co. uses LIFO inventory method. At the end of the 2006 accounting period, the company reported $10,000 of net earnings on I/S. The inventory balance on the 2006 B/S is $7,000. In the footnotes, LIFO reserve at the end of 2006 is $3,000 and LIFO reserve at the end of 2005 is $2,500. JJ Co. uses FIFO and reported 10,300 of net earnings on the 2006 I/S. Which company has a higher earnings if both of the companies would use the same inventory method?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter7: Inventories: Cost Measurement And Flow Assumptions

Section: Chapter Questions

Problem 3RE: Reid Company uses the periodic inventory system. On January 1, it had an inventory balance of...

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