Question

HH Company uses LIFO. HH disclosed that if FIFO had been used, inventory at the end...

HH Company uses LIFO. HH disclosed that if FIFO had been used, inventory at the end of 2016 would have been $20 million lower. Assuming HH has a 30% income tax rate:

a. Its reported cost of goods for 2016 would have been $14 million less if it had used FIFO rather than LIFO for its financial statements.

b. Its reported cost of goods for 2016 would have been $20 million less if it had used FIFO rather than LIFO for its financial statements.

c. Its reported cost of goods sold for 2016 would have been $14 million higher if it had used FIFO rather than LIFO for its financial statements.

d. Its reported cost of goods sold for 2016 would have been $20 million higher if it had used FIFO rather than LIFO for its financial statements

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Correct answer is Option - d. Its reported cost of goods sold for 2016 would have been $ 20 million higher if it had used FIFO rather than LIFO for its financial statements.

Presently HH Company uses LIFO method, and company disclosed that if FIFO method had been used, the closing inventory of the year 2016 would have been $ 20 million lower. Then it is clear that the Cost of goods sold for 2016 would have been $ 20 million higher if it had used FIFO rather than LIFO for its financial statements.

Income tax rate has no impact on the above calculation.

All other given options are wrong.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Mannisto, Inc., uses the FIFO inventory cost flow assumption. In a year of rising costs and...
Mannisto, Inc., uses the FIFO inventory cost flow assumption. In a year of rising costs and prices, the firm reported net income of $262,952 and average assets of $1,590,420. If Mannisto had used the LIFO cost flow assumption in the same year, its cost of goods sold would have been $32,360 more than under FIFO, and its average assets would have been $33,860 less than under FIFO. Required: a. Calculate the firm's ROI under each cost flow assumption (FIFO and...
At the beginning of 2016, Air Parts Corp. changed from LIFO to FIFO for inventory costing....
At the beginning of 2016, Air Parts Corp. changed from LIFO to FIFO for inventory costing. Cost of goods sold under LIFO for the last two years was (in millions): 2014: $405 2015: $420 Cost of good sold under FIFO would have been: 2014: $360 2015: $365 Prior to 2014, the cost of goods sold would have been lower by $300 under FIFO. Air Parts pays income taxes at a rate of 40%. Retained earnings on January 1, 2014, was...
Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2018...
Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2018 decided to change to the FIFO method. The inventory as reported at the end of 2017 using LIFO would have been $15 million higher using FIFO. Retained earnings reported at the end of 2016 and 2017 was $235 million and $255 million, respectively (reflecting the LIFO method). Those amounts reflecting the FIFO method would have been $245 million and $267 million, respectively. 2017 net...
Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2018...
Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2018 decided to change to the FIFO method. The inventory as reported at the end of 2017 using LIFO would have been $15 million higher using FIFO. Retained earnings reported at the end of 2016 and 2017 was $235 million and $255 million, respectively (reflecting the LIFO method). Those amounts reflecting the FIFO method would have been $245 million and $267 million, respectively. 2017 net...
Grimstad Company uses FIFO for internal reporting purposes and LIFO for financial reporting and income tax...
Grimstad Company uses FIFO for internal reporting purposes and LIFO for financial reporting and income tax purposes. At the end of 2016, the following information was obtained from the inventory records: 2015 2016 Ending inventory, FIFO 100,000 140,000 Ending inventory, LIFO 80,000 115,000 Required: 1. Prepare the necessary adjusting journal entry assuming that Grimstad converts the accounts to LIFO at the end of 2016. 2. Indicate how Grimstad would disclose the inventory value in its notes to the financial statements...
Carolina Company uses the LIFO method for valuing its ending inventory. The following financial statement information...
Carolina Company uses the LIFO method for valuing its ending inventory. The following financial statement information is available for its first year of operation: Carolina Company Income Statement For the year ended December 31 Sales    60,000 Cost of Goods sold   23,000 Gross Profit   37,000 Expenses 13,000 Income before taxes $ 24,000 Carolina's ending inventory using the LIFO method was $8,700. Carolina's accountant determined that had the company used FIFO, the ending inventory would have been $9,100. a. Determine what...
Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2021...
Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2021 decided to change to the FIFO method. The inventory as reported at the end of 2020 using LIFO would have been $25 million higher using FIFO. Retained earnings reported at the end of 2019 and 2020 was $245 million and $265 million, respectively (reflecting the LIFO method). Those amounts reflecting the FIFO method would have been $255 million and $277 million, respectively. 2020 net...
Nonny Company uses the LIFO method of inventory valuation. For Year 6, cost of goods sold...
Nonny Company uses the LIFO method of inventory valuation. For Year 6, cost of goods sold was $150,000. Beginning inventory was $25,000 and ending inventory was $30,000. If Nonny had used the FIFO method of inventory valuation, beginning inventory would have been $15,000 and ending inventory would have been $40,000. What would Nonny’s cost of goods sold in Year 6 have been if Nonny had used FIFO?
Yoseff Company uses the LIFO method of inventory valuation. For Year 5, cost of goods sold...
Yoseff Company uses the LIFO method of inventory valuation. For Year 5, cost of goods sold was $45,000. Beginning inventory was $5,000 and ending inventory was $6,000. If Yoseff had used the FIFO method of inventory valuation, beginning inventory would have been $8,000 and ending inventory would have been $11,000. What would Yoseff’s cost of goods sold in Year 5 have been if Yoseff had used FIFO?
With respect to LIFO, which of the following is incorrect? If a company uses LIFO for...
With respect to LIFO, which of the following is incorrect? If a company uses LIFO for tax purposes it must use it for GAAP purposes If the LIFO reserve increases in a given year, then LIFO COGS is higher than it would have been if FIFO had been used for that year LIFO results in better matching on the income statement than FIFO LIFO results in inventory levels on the balance sheet that are closer to current cost than FIFO
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT