Exam 6: Inventories

The selection of an appropriate inventory cost flow assumption for an individual company is made by

Eckert Company reported the following summarized annual data at the end of 2010: *Based on an ending FIFO inventory of $250,000. The income tax rate is 30%. The controller of the company is considering a switch from FIFO to LIFO. He has determined that on a LIFO basis, the ending inventory would have been $200,000. Instructions (a) Restate the summary information on a LIFO basis. (b) What effect, if any, would the proposed change have on EcKert's income tax expense, net income, and cash flows? (c) If you were an owner of this business, what would your reaction be to this proposed change?

The following information is available for Massey Company: Assume that Massey uses a periodic inventory system and that there are 700 units left at the end of the month. Instructions Compute the cost of ending inventory under the (a) FIFO method. (b) LIFO method.

As a result of a thorough physical inventory, Hastings Company determined that it had inventory worth $270,000 at December 31, 2010. This count did not take into consideration the following facts: Carlin Consignment store currently has goods worth $52,000 on its sales floor that belong to Hastings but are being sold on consignment by Carlin. The selling price of these goods is $75,000. Hastings purchased $20,000 of goods that were shipped on December 27. FOB destination, that will be received by Hastings on January 3. Determine the correct amount of inventory that Hastings should report.