# Question: Q1 Use the LIFO cost flow assumption to answer the following

Q1. Use the LIFO cost-flow assumption to answer the following questions.
YEAR 1: Purchase #1 1,000 units @ \$1 = \$1,000
Purchase #2 1,000 units @ \$1 = \$1,000
a. How much is goods available for sale? __________
Sell 1,000 units.
b. What costs remain in ending inventory? __________
YEAR 2: Beginning inventory ________ units @ ____ per unit = __________
Purchase 2,000 units @ \$2 = \$4,000
a. How much is goods available for sale? __________
Sell 2,000 units.
b. What costs remain in ending inventory? __________
YEAR 3: Beginning inventory __________ units @ ____ per unit = __________
Purchase 3,000 units @ \$3 = \$9,000
a. How much is goods available for sale? __________
Sell 3,000 units.
b. What costs remain in ending inventory? __________
Q2. The Coca-Cola Company is more than 100 years old. Coca-Cola uses the LIFO cost-flow assumption.
a. So how old are those inventory costs on the balance sheet?
b. When will Coca-Cola get those “ancient” LIFO inventory costs off of the balance sheet?
c. Because Coca-Cola uses LIFO, does it have cans of Coca-Cola that have been sitting in the warehouse since the company started business? (Yes / No)
Q3. Summarize the effects of using the FIFO and LIFO cost-flow assumptions on COGS and Ending Inventory by circling the type of costs allocated to each below.
Q4. May a company use LIFO for tax purposes and FIFO for external reporting to shareholders? (Yes / _______)
Why would a company want to do this?

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• CreatedSeptember 17, 2015
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