The management of Tamarisk Company has asked its accounting department to describe the effect upon the company's financial position and its income statements of accounting for inventories on the LIFO rather than the FIFO basis during 2025 and 2026. The accounting department is to assume that the change to LIFO would have been effective on January 1, 2025, and that the initial LIFO base would have been the inventory value on December 31, 2024. The following are the company's financial statements and other data for the years 2025 and 2026 when the FIFO method was employed. Financial Position as of 12/31/24 12/31/25 12/31/26 Cash $99,000 $143,000 $169,400 Accounts receivable 88,000 110,000 132.000 Inventory 132,000 154,000 193,600 Other assets 176,000 187,000 220,000 Total assets $495,000 $594,000 $715,000 Accounts payable $44,000 $66,000 $88,000 Other liabilities 77,000 88,000 121,000 Common stock 220,000 220,000 220,000 Retained earnings 154,000 220,000 286,000 Total liabilities and equity $495,000 $594,000 $715,000 SUPP Income for Years Ended 12/31/25 12/31/26 Sales revenue $990,000 $1,485,000 Less: Cost of goods sold 555,500 831,600 Other expenses 225,500 334,400 781,000 1,166,000 Income before income taxes 209,000 319,000 Income taxes (40%) 83,600 127,600 Net income $125,400 $191,400 Other data: 1. Inventory on hand at December 31, 2024, consisted of 44,000 units valued at $3.00 each. 2. Sales (all units sold at the same price in a given year): 2025-165,000 units @ $6.00 each 2026-198,000 units @ $7.50 each 3. Purchases (all units purchased at the same price in given year): 2025-165,000 units @$3.50 each 2026-198,000 units @ $4.40 each 4. Income taxes at the effective rate of 40% are paid on December 31 each year. Name the account(s) presented in the financial statements that would have different amounts for 2026 if LIFO rather than FIFO had been used, and state the new amount for each account that is named.
The management of Tamarisk Company has asked its accounting department to describe the effect upon the company's financial position and its income statements of accounting for inventories on the LIFO rather than the FIFO basis during 2025 and 2026. The accounting department is to assume that the change to LIFO would have been effective on January 1, 2025, and that the initial LIFO base would have been the inventory value on December 31, 2024. The following are the company's financial statements and other data for the years 2025 and 2026 when the FIFO method was employed. Financial Position as of 12/31/24 12/31/25 12/31/26 Cash $99,000 $143,000 $169,400 Accounts receivable 88,000 110,000 132.000 Inventory 132,000 154,000 193,600 Other assets 176,000 187,000 220,000 Total assets $495,000 $594,000 $715,000 Accounts payable $44,000 $66,000 $88,000 Other liabilities 77,000 88,000 121,000 Common stock 220,000 220,000 220,000 Retained earnings 154,000 220,000 286,000 Total liabilities and equity $495,000 $594,000 $715,000 SUPP Income for Years Ended 12/31/25 12/31/26 Sales revenue $990,000 $1,485,000 Less: Cost of goods sold 555,500 831,600 Other expenses 225,500 334,400 781,000 1,166,000 Income before income taxes 209,000 319,000 Income taxes (40%) 83,600 127,600 Net income $125,400 $191,400 Other data: 1. Inventory on hand at December 31, 2024, consisted of 44,000 units valued at $3.00 each. 2. Sales (all units sold at the same price in a given year): 2025-165,000 units @ $6.00 each 2026-198,000 units @ $7.50 each 3. Purchases (all units purchased at the same price in given year): 2025-165,000 units @$3.50 each 2026-198,000 units @ $4.40 each 4. Income taxes at the effective rate of 40% are paid on December 31 each year. Name the account(s) presented in the financial statements that would have different amounts for 2026 if LIFO rather than FIFO had been used, and state the new amount for each account that is named.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The management of Tamarisk Company has asked its accounting department to describe the effect upon the company's financial position and its income statements of accounting for
inventories on the LIFO rather than the FIFO basis during 2025 and 2026. The accounting department is to assume that the change to LIFO would have been effective on January 1, 2025, and
that the initial LIFO base would have been the inventory value on December 31, 2024. The following are the company's financial statements and other data for the years 2025 and 2026 when
the FIFO method was employed.
Financial Position as of
12/31/24
12/31/25
12/31/26
Cash
$99,000
$143,000 $169,400
Accounts receivable
88,000
110,000 132,000
Inventory
132,000
154,000 193,600
Other assets
176,000
187,000
220,000
Total assets
$495,000
$594,000 $715,000
Accounts payable
$44,000
$66,000
$88,000
Other liabilities
77,000
88,000
121,000
Common stock
220,000
220,000
220,000
Retained earnings
154,000
220,000 286,000
Total liabilities and equity $495,000
$594,000 $715,000
Income for Years Ended
12/31/25
12/31/26
Sales revenue
$990,000 $1,485,000
Less: Cost of goods sold
555,500
831,600
Other expenses
225,500
334,400
781,000
1,166,000
Income before income taxes
209,000
319,000
Income taxes (40%)
83,600
127,600
Net income
$125,400
$191,400
Other data:
1.
2.
Inventory on hand at December 31, 2024, consisted of 44,000 units valued at $3.00 each.
Sales (all units sold at the same price in a given year):
2025-165,000 units @ $6.00 each
2026-198,000 units @ $7.50 each
3.
Purchases (all units purchased at the same price in given year):
2025-165,000 units @ $3.50 each
2026-198,000 units @ $4.40 each
4.
Income taxes at the effective rate of 40% are paid on December 31 each year.
SUPPOR
Name the account(s) presented in the financial statements that would have different amounts for 2026 if LIFO rather than FIFO had been used, and state the new amount for each account that
is named.
Account
New amount
for 2026
SUPPOR
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