Wilmington Corporation reported the following in its 2009 annual report:
Inventories $ 87,200 $102,500
Accounts Payable $30,000 $38,800
Cost of products sold $300,000
Wilmington measures its inventory on a LIFO basis. The footnote relating to inventory stated "If inventories were valued on the FIFO basis, total inventories would have been $130,800 and $106,300 at December 31, 2009, and December 31, 2008 respectively." Assume that the cost of product sold relates entirely to items the company carries in its inventory.
1. How much larger would ending inventory be under FIFO compared to LIFO at the end of 2008?
2. How much larger would ending inventory be under FIFO compared to LIFO at the end of 2009?
3. How much lower income did LIFO report for 2009 compared to income that would have been reported under FIFO? (Ignore Taxes)
1.How much larger would ending inventory be under FIFO compared to LIFO at the end of 2008?
Consider the following:
Inventory under FIFO at December 31, 2008 $106,300
Inventory under LIFO at December 31, 2008 $87,200
Excess of FIFO over LIFO $19,100
2.How much larger would ending inventory be ...
This solution illustrates how to compare the FIFO and LIFO values of inventory and the reported net income under each method. All steps are shown.