The management of Tritt Company has asked its accounting department to describe the effect upon the company's financial position and its income statements of accounting for inventories on the LIFO rather than the FIFO basis during 2017 and 2018. The accounting department is to assume that the change to LIFO would have been effective on January 1, 2017, and that the initial LIFO base would have been the inventory value on December 31, 2016. The following are the company's financial statements and other data for the years 2017 and 2018 when the FIFO method was employed.

Other data:
1. Inventory on hand at December 31, 2016, consisted of 40,000 units valued at $3.00 each.
2. Sales (all units sold at the same price in a given year):
2017-150,000 units @ $6.00 each............2018-180,000 units @ $7.50 each
3. Purchases (all units purchased at the same price in given year):
2017-150,000 units @ $3.50 each.............2018-180,000 units @ $4.40 each
4. Income taxes at the effective rate of 40% are paid on December 31 each year.
Instructions
Name the account(s) presented in the financial statements that would have different amounts for 2018 if LIFO rather than FIFO had been used, and state the new amount for each account that is named. Show computations.

Transcribed Image Text:

Financial Position as of Cash Accounts receivable Inventory Other assets 12/31/16 S 90,000 80,000 120,000 160,000 $450,000 12/31/17 $130,000 100,000 140,000 170,000 $540,000 12/31/18 $154,000 120,000 176,000 200,000 $650,000 Total assets Accounts payable Other liabilities Common stock $ 40,000 70,000 200,000 140,000 $450,000 S60,000 80,000 200,000 200,000 540,000 80,000 110,000 200,000 260,000 $650,000 etained earnings Total liabilities and equity Income for Years Ended 12/31/18 $900,000 $1,350,000 756,0000 304,IXX) 1060,0) 290,000 116,000 $114,000 174,1000 12/31/17 Sales revenue Less: Cost of goods sold 505,000 205,000 710,000 190,0100 76,00 Other expenses Income before income taxes Income taxes (40%) Net income