Answered: Suppose that David has elected to… | bartleby

FINANCIAL ACCOUNTING

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Suppose that David has elected to account for inventories and has adopted the last-in, first-out (LIFO) inventory-flow method for his business inventory of widgets (purchase prices below).

| Widget | Purchase Date | Direct Costs | Other Costs | Total Cost |
|---------|---------------|--------------|-------------|------------|
| Number 1| August 15 | $2,100 | $100 | $2,200 |
| Number 2| October 30 | $2,200 | $150 | $2,350 |
| Number 3| November 10 | $2,300 | $100 | $2,400 |

In late December, David sold one widget, and next year David expects to purchase three more widgets at the following estimated prices:

| Widget | Purchase Date | Estimated Cost |
|---------|---------------|----------------|
| Number 4| Early spring | $2,600 |
| Number 5| Summer | $2,260 |
| Number 6| Fall | $2,400 |

d. Suppose that David initially adopted the LIFO method but wants to apply for a change to FIFO next year. What would be his $481 adjustment for this change, and over how many year(s) would he make the adjustment?

| FIFO | |
|-------------------------------|--------------------------|
| David's $481 adjustment amount| |
| Number of year(s) | |

This section deals with accounting methods for inventory management in business, specifically comparing LIFO and FIFO approaches.

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