ABC Company uses a LIFO cost flow assumption for it inventory of tires and at the start of 2020 had the following beginning inventory layers: 

During 2020 ABC was not able to purchase as many tires as it sold resulting in the need to include in cost of goods sold the cost of 95 units of its beginning inventory. The price of tires purchased in 2020 held constant throughout the year at $78 per tire. 

1. How much would ABC report as LIFO liquidation in its 2020 financial statements? 

2. As a financial analyst assigned to produce a detailed report on the results of operations for ABC in 2020, knowledge of the liquidation would results in you adjusting which ratio(s) in your report? Explain precisely how you would adjust the ratio(s) and the impact on the ratio(s) of your adjustment.

Transcribed Image Text:

Year of LIFO Cost per Layer # Units Unit $35 $43 1995 100 2001 56 2011 75 $65 Year of LIFO Cost per Layer # Units Unit $35 $43 1995 100 2001 56 2011 75 $65

Answer rating: 100% (QA)

Dear as the company follows LIFO method cost of beginning i... View the full answer