LIFO was designed to protect cash flow in industries where prices increase rapidly. It has been...

Transcribed Image Text:

LIFO was designed to protect cash flow in industries where prices increase rapidly. It has been used for both tax and financial statement reporting since the 1930s. The higher cost of goods sold under LIFO in these circumstances results in lower reported profit than under FIFO. In the 2012 budget, President Obama has threatened to repeal LIFO. If Exxon uses FIFO for its inventory valuation, calculate the cost of ending inventory and cost of goods sold if ending inventory is 110 barrels of crude oil: Beginning inventory and Barrel purchases Barrels cost Total cost January 1 136 $ 94 $ 12,784 March 1 61 103 6,283 June 1 76 97 7,372 September 1 86 92 7,912 December 1 61 102 6,222 420 $ 40,573 Cost of ending inventory Cost of goods sold LIFO was designed to protect cash flow in industries where prices increase rapidly. It has been used for both tax and financial statement reporting since the 1930s. The higher cost of goods sold under LIFO in these circumstances results in lower reported profit than under FIFO. In the 2012 budget, President Obama has threatened to repeal LIFO. If Exxon uses FIFO for its inventory valuation, calculate the cost of ending inventory and cost of goods sold if ending inventory is 110 barrels of crude oil: Beginning inventory and Barrel purchases Barrels cost Total cost January 1 136 $ 94 $ 12,784 March 1 61 103 6,283 June 1 76 97 7,372 September 1 86 92 7,912 December 1 61 102 6,222 420 $ 40,573 Cost of ending inventory Cost of goods sold