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Inventory Methods - LIFO and FIFO

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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's reserve at the end of 2006 is $3,000 and LIFO's 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 would have higher earnings if both of the companies used the same inventory method?

A. KK
B. JJ
C. Cannot determine

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C. Cannot determine

This is impossible to determine unless we know if they're both going to use FIFO or LIFO. ...

Solution Summary

This solution explains which company would have higher earnings if both of the companies used the same inventory method.

$2.19