Question

Edmonton Oilers Corporation disclosed the following in it's 2020 Balance sheet and Income Statement:

Inventories 2020 $13,469 2019 $14,445

Cost of Good Sold 2020 $144,289 2019 $156,494

Additionally, Collins disclosed the following in the notes to the financial statements:

"Crude oil, products and merchandise inventories are carried at the lower of current market value or cost (generally determined under the last-in, first-out method -LIFO)."

"The aggregate replacement cost of inventories was estimated to exceed their LIFO carrying values bu $9,753 and $8,208 at December 31, 2020, and 2019, respectively."

What is the amount that collins would have reported for COGS under FIFO for the year ended December 31, 2020?

Answer 1

Answer:

Under FIFO method inventories are value on the basis of latest purchases which would be replacement cost.

As such for the year 2020:

FIFO beginning inventory will increase by = $8,208

FIFO Ending inventory will increase by = $9753

We know:

Cost of goods sold = Begiining inventory + Purchase - Ending inventory

As such:

Impact on Cost of goods sold for 2020 for conversion to FIFO = Increase in beginning Inventory - Increase in ending inventory

= 8208 - 9753

= - $1545

Hence:

COGS under FIFO for the year ended December 31, 2020 = $144,289 - 1545 = $142,744

COGS under FIFO for the year ended December 31, 2020 = $142,744