Assignment:
Control Furniture Company
Annual Report Excerpts
(Figures in thousands of dollars)
December 31
Year X1 Year X2
Inventories at FIFO cost 846.3 852.6
Excess of FIFO cost over LIFO cost (231.4) (257.2)
Inventories at LIFO cost 614.9 595.4
Income Tax Rate is 34%
Answers are rounded to the nearest decimal point.
Q1. Given the financial information above what would be the effect on cash in year X1 of converting the company from LIFO to FIFO:
A) Increase of 78.7
B) Decrease of 78.7
C) Decrease of 152.7
D) Decrease of 87.4
Q2. Given the financial information above what would be the effect on cash in year X2 of converting the company from LIFO to FIFO:
A) Increase of 78.7
B) Decrease of 78.7
C) Decrease of 152.7
D) Decrease of 87.4
Q3. Given the financial information above what would be the effect on COGS in year X2 of converting the company from LIFO to FIFO:
A) Increase of 25.8
B) Decrease of 25.8
C) Decrease of 8.8
D) Decrease of 78.7
Q4. Given the financial information above what would be the effect on net income in year X2 of converting the company from LIFO to FIFO:
A) Increase of 25.8
B) Decrease of 25.8
C) Decrease of 8.8
D) Decrease of 8.8
Q5. The use of LIFO rather than FIFO for inventory costing under normal economic conditions results in:
I. lower net income
II. Higher
III. Higher retained earnings
IV. Unchanged retained earnings.
A) II and III
B) I, III and IV
C) I only
D) I and IV