LIFO was designed to protect cash flow in industries where prices increase rapidly. It has been used for both tax and financial statement reporting since the 1930s. The higher cost of goods sold under LIFO in these circumstances results in lower reported profit than under FIFO. In the 2012 budget, President Obama has threatened to repeal LIFO. If Exxon uses FIFO for its inventory valuation, calculate the cost of ending inventory and cost of goods sold if ending inventory is 110 barrels of crude oil: Beginning inventory and purchases Barrels Barrel cost Total cost January 1 135 $ 96 $ 12,960 March 1 60 102 6,120 June 1 75 99 7,425 September 1 85 91 7,735 December 1 60 104 6,240 415 $ 40,480 Cost of ending inventory Cost of goods sold
LIFO was designed to protect cash flow in industries where prices increase rapidly. It has been used for both tax and financial statement reporting since the 1930s. The higher cost of goods sold under LIFO in these circumstances results in lower reported profit than under FIFO. In the 2012 budget, President Obama has threatened to repeal LIFO. If Exxon uses FIFO for its inventory valuation, calculate the cost of ending inventory and cost of goods sold if ending inventory is 110 barrels of crude oil: Beginning inventory and purchases Barrels Barrel cost Total cost January 1 135 $ 96 $ 12,960 March 1 60 102 6,120 June 1 75 99 7,425 September 1 85 91 7,735 December 1 60 104 6,240 415 $ 40,480 Cost of ending inventory Cost of goods sold
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Rahul
Transcribed Image Text:LIFO was designed to protect cash flow in industries where prices increase rapidly. It has been used for both tax and financial
statement reporting since the 1930s. The higher cost of goods sold under LIFO in these circumstances results in lower reported profit
than under FIFO. In the 2012 budget, President Obama has threatened to repeal LIFO. If Exxon uses FIFO for its inventory valuation,
calculate the cost of ending inventory and cost of goods sold if ending inventory is 110 barrels of crude oil:
Beginning inventory
and purchases
Barrels
Barrel
cost
Total cost
January 1
135
$ 96
$ 12,960
March 1
60
102
6,120
June 1
75
99
7,425
September 1
85
91
7,735
December 1
60
104
6,240
415
$ 40,480
Cost of ending inventory
Cost of goods sold
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