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Worked-example setupScope and assumptions
- Cedar Trail is fictional, and the rights, costs, dates, removals, method, and matched FIFO comparison are supplied for calculation practice.
- The opening reserve is zero for the bounded comparison; no tax adjustment is computed.
- The liquidation fact pattern is a separate stipulated pool and does not alter the method-comparison stream.
- Period
- One inventory period
- Units
- Inventory units and US dollars
- Rounding
- Display dollars to cents
Separate the periodic and perpetual timelines
Cedar begins with 50 units at $10, buys 30 at $12, sells 60, buys 40 at $15, and sells 20. It has 120 units and $1,460 available. Eighty units sell.
Periodic LIFO assigns 40 units at $15, 30 at $12, and 10 at $10 to expense. Cost of goods sold is $1,060, and 40 units at $10 remain for $400. Perpetual LIFO assigns the first sale 30 units at $12 and 30 at $10, or $660. The second sale receives 20 units at $15, or $300. Perpetual cost of goods sold is $960, and ending inventory is $500.
Build a matched ending bridge
Periodic FIFO ending inventory is $600 for the same date, units, and pool. The
ending LIFO reserve is $600 − $400 = $200. Because the supplied opening
reserve is zero, the reserve change is also $200. FIFO comparison cost of goods
sold is $1,060 − $200 = $860. A nonzero opening reserve would make the ending
reserve and current-period change different.
Isolate a separate liquidation effect
In a separate pool, 12 units from an older $9 layer replace costs that would
otherwise be $15. The stipulated reduction in cost of goods sold is 12 × ($15 − $9) = $72, so pretax income is $72 higher before tax. This amount does not
prove better operations or cash generation.
Complete the independent Northstar LIFO review.
Verified calculation · inventory cost flow analysis
The curriculum loader recomputed this example before it entered the site build. Expand any structured input to inspect the stated facts.
- current unit cost
- 15
- events
- 4 items
Inspect data
[
{
"kind": "purchase",
"unit_cost": 12,
"units": 30
},
{
"kind": "sale",
"unit_cost": null,
"units": 60
},
{
"kind": "purchase",
"unit_cost": 15,
"units": 40
},
{
"kind": "sale",
"unit_cost": null,
"units": 20
}
]- liquidated layer unit cost
- 9
- liquidation units
- 12
- opening layers
- 1 field
Inspect data
{
"opening_units": {
"unit_cost": 10,
"units": 50
}
}- opening lifo reserve
- 0
Recomputed result
| Measure | Value |
|---|---|
| ending lifo reserve | 200 |
| ending units | 40 |
| fifo comparison cost of goods sold | 860 |
| goods available cost | 1,460 |
| goods available units | 120 |
| lifo liquidation pretax income increase | 72 |
| lifo reserve change | 200 |
| periodic fifo ending inventory | 600 |
| periodic lifo cost of goods sold | 1,060 |
| periodic lifo ending inventory | 400 |
| perpetual lifo cost of goods sold | 960 |
| perpetual lifo ending inventory | 500 |
| units sold | 80 |