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# Maxwell Corporation: change from LIFO to FIFO.

In 2004, Maxwell Corporation changed its method of inventory pricing
from LIFO to FIFO. Net income computed on a LIFO as compared to a
FIFO basis for the four years involved is: (Ignore income taxes.)

LIFO FIFO
??????? ???????
2001 \$68,200 \$73,700
2002 74,500 78,100
2003 77,000 81,400
2004 82,500 84,700

INSTRUCTIONS
(a) Indicate the net income that would be shown on comparative
financial statements issued at 12/31/04 for each of the four
years, assuming that the company changed to the FIFO method in
2004.

(b) Assume that the company had switched from the average cost
method to the FIFO method with net income on an average cost
basis for the four years as follows: 2001, \$70,400;
2002, \$76,120; 2003, \$80,300; and 2004, \$83,600. Indicate the
net income that would be shown on comparative financial state-
ments issued at 12/31/04 for each of the four years under these
conditions.

(c) Assuming that the company switched from the FIFO to the LIFO
method, what would be the net income reported on comparative
financial statements issued at 12/31/04 for 2001, 2002, and
2003?

#### Solution Preview

LIFO and FIFO
In 2004, Maxwell Corporation changed its method of inventory pricing
from LIFO to FIFO. Net income computed on a LIFO as compared to a
FIFO basis for the four years involved is: (Ignore income taxes.)

LIFO FIFO
??????? ???????
2001 \$68,200 \$73,700
2002 74,500 78,100
2003 77,000 81,400
2004 82,500 84,700

INSTRUCTIONS
(a) Indicate the net income that would be shown on comparative
financial statements issued at 12/31/04 for each of the four
years, ...

#### Solution Summary

This solution is comprised of answers indicating the net income that would be shown on comparative financial statements issued at 12/31/04 for each of the four years, assuming that the company changed to the FIFO method in 2004 and assuming that the company switched from the FIFO to the LIFO method, what would be the net income reported on comparative financial statements issued at 12/31/04 for 2001, 2002, and 2003.

\$2.19