Impact of LIFO Inventory System The Manuel Corporation sells household appliances and uses LIFO for…

Impact of LIFO Inventory System

The Manuel Corporation sells household appliances and uses LIFO for inventory costing. The inventory contains 10 different products, and historical LIFO layers are maintained for each of them. The LIFO layers for one of the products, Easy Chef, were as follows at December 31, 2007:

2006 layer                      

4,000 @ $90

1997 layer                   

1,000 @ $75

2001 layer                      

3,500 @ $85

1995 layer                  

3,000 @ $52

Instructions:

1. What was the value of the ending inventory of Easy Chefs at December 31, 2007?

2. How did the December 31, 2007, quantity of Easy Chefs compare with the December 31, 2006, quantity?

3. What is the value of the ending inventory of Easy Chefs at December 31, 2008, if there are 11,200 units on hand?

4. How would net income in (3) be affected if, in addition to the quantity on hand, 1,250 units were in transit to Manuel Corporation at December 31, 2008? The shipment was made on December 26, 2008, terms FOB shipping point. Total invoice cost was $131,250. Ignore income taxes.

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