Reformulating Balance Sheet and Income Statement Items for LIFO to FIFO In its D

Question

Reformulating Balance Sheet and Income Statement Items for LIFO to FIFO In its December 2016 10-K, LyondellBasell Industries reported the following information ($ millions). Cost of Goods Sold LIFO Increase in Total Net Reserve LIFO Reserve Assets Income Inventories $23,238 $3,920 $610 $537 $24,553 $3,948 Reformulate the account balance for the following financial statement items assuming the company used FIFO instead of LIFO for its inventory costing method. The company has a 35% tax rate Account Balance a. Inventories million b. Total assets million c. Cost of goods sold million d. Net income million

Explanation / Answer

LIFO Reserve is the difference between what Closing Inventory would have been if Company uses FIFO Method

LIFO Reserve = FIFO Inventory - LIFO Inventory

FIFO Inventory = LIFO Reserve + LIFO Inventory

LIFO Reserve = OP Balance + Addition During the year

LIFO Reserve = $ 619 + $ 537 = 1156

FIFO Inventory = 1156+3920= 5076

Total Assets using LIFO= 24553

Total Assets using LIFO= Total Assets using LIFO + Change due to method conversion

= 24563+1156=25719

COGS under FIFO= COGS under LIFO-Change in LIFO Reserve

= 23238-537=22701

There will be an increase in income during to change in Method

Income will increase by 537

Income after tax = 537*.65=349.05

Net income under FIFO Method = 3948+349.05=4297.05

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