Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 6 - Reporting and Analyzing Inventory - Brief Exercises: BE6-7


1) The question that is present here asks one to compute the ending inventory value for the motorcoach company mentioned in the text with respect to inventories they had for the most recent year. 2) When looking at the details that are present in the text, note that there is the actual LIFO inventory value of $46,850,000.00 and a reserve of $30,346,000.00. 3) The FIFO inventory would be the sum of $77,196,000.00 for the company in question when converted over.

Work Step by Step

1) Note that the key with this question is to convert from a last-in-first-out (LIFO) methodology to a first-in-first-out (FIFO) inventory cost system. 2) Note that the reserve's purpose here is to show the difference between a FIFO and a LIFO value for inventory. This is a cumulative value that usually increases over time and is never close to zero. 3) However, when converting from a LIFO to a FIFO, the two values shown above must be combined to get the desired value here.
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