financial statement effects of fifo and lifo the management of tritt company has as 1574815

(Financial Statement Effects of FIFO and LIFO) 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 2014 and 2015. The accounting department is to assume that the change to LIFO would have been effective on January 1, 2014, and that the initial LIFO base would have been the inventory value on December 31, 2013. Presented below are the company’s financial statements and other data for the years 2014 and 2015 when the FIFO method was employed.

Other data:

1. Inventory on hand at December 31, 2013, consisted of 40,000 units valued at $3.00 each.

2. Sales (all units sold at the same price in a given year):

2014—150,000 units @ $6.00 each            2015—180,000 units @ $7.50 each

3. Purchases (all units purchased at the same price in given year):

2014—150,000 units @ $3.50 each            2015—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 2015 if LIFO rather than FIFO had been used, and state the new amount for each account that is named. Show computations.