The file you downloaded is some parts of financial statements of Manzanita Inc.

Question

The file you downloaded is some parts of financial statements of Manzanita Inc. Manzanita prepares its financial statements in accordance with U.S. GAAP, and uses the LIFO method to account for its inventory.

1. What inventory value would Manzanita report for 2014 if Manzanita had used the FIFO method instead of the LIFO method?

2. What amount would Manzanita's cost of goods sold for 2014 be if Manzanita had used the FIFO method instead of the LIFO method?

3. What net income would Manzanita report for 2014 if Manzanita had used the FIFO method instead of LIFO method?

MANZANITA Inc. Balance Sheet information (USS millions) As of December 31 Cash and cash equivalent Accounts receivable Inventories Other current assets 2014 367 1,378 1,260 375 3,380 9,105 12,485 689 2,696 3,385 1,932 5,317 4,956 2,212 7,168 12,485 2013 423 1,364 1,015 195 2,997 8,916 11,913 502 3,073 3,575 1,812 5,387 4,956 1,570 6,526 11,913 Total current assets Property and equipment, net Total assets Account payable Other current liabilities Total current liabilities Long-term debt Total liabilities Common stock and paid in capital Retained earnings Total shareholders' equity otal liabilities and shareholders' equity Income Statement Information (US$ millions) For Years Ended December 31 Sales Cost of goods sold Depreciation expense Selling, general, and administrative expense Interest expense Income tax expense Net income 2014 13,038 6,633 417 4,968 93 185 742 2013 12,483 6,441 357 4,911 54 144 576 Notes The LIFO reserves as of December 31 2014 and 2013 are $465 million and $351 million. The effective tax rate for 2014 and earlier periods is 20%. No items impacted retained earnings other than net income and dividends.

Explanation / Answer

1. LIFO Reserve = Inventory Balance Under FIFO Method – Inventory Balance Under LIFO Method

or Say Inventory Balance Under FIFO Method = Inventory Balance Under LIFO Method + LIFO Reserve.

= 1260 + 465 = 1725

2. COGS Under FIFO Method = COGS Under LIFO – (Ending LIFO Reserve – Beginning LIFO Reserve)

= 6633 - ( 465 - 351) = 6519

3. Net Income under FIFO Method = Net Income Under LIFO + Reduction in COGS on Valuing @ FIFO

= 742 + (6633 - 6519) = 856

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.