Practice prompt · Q:inventory-ownership-cost-flow-and-measurement/lifo-to-fifo-restatement-001

Restate a last-in first-out filer for comparison

Tests whether the learner applies the disclosed reserve to inventory and to cost of goods sold in the right directions.

Updated Sep 11, 2026 Review due Nov 18, 2026

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A filer reports inventory of 640,000 on a last-in first-out basis and discloses a reserve of 155,000 at year end and 118,000 at the start of the year. Cost of goods sold for the year is 2,900,000.

The reserve is disclosed precisely so a reader can put a last-in first-out filer beside a first-in first-out competitor. The balance sheet takes the closing reserve; the income statement takes only the change in it.

Choose the best answer. a Inventory on a first-in first-out basis is 795,000, and cost of goods sold is 2,863,000. b Inventory is 795,000 and cost of goods sold is 2,745,000. c Inventory is 485,000 and cost of goods sold is 2,937,000. d Inventory is 795,000 and cost of goods sold is unchanged at 2,900,000.

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Answer: a

Choice a. Inventory is 640,000 plus 155,000; cost of goods sold is 2,900,000 less the 37,000 increase in the reserve.