Problem:
MVP Corp uses LIFO to value its inventory. The 20x8 inventory records disclose the following:
Beginning Inventory: Units Unit Cost
First layer 10,000 $15
Second layer 22,000 18
Purchases 250,000 20
At December 26, 20x8, the company had a special, nonrecurring opportunity to purchase 40,000 units at $17 per unit. The purchase can be made and the units delivered on December 30, or it can be delayed until the first week of January 20x9. The company plans to make the purchase, due to the obvious cost savings involved. Sales for 20x8 totaled 245,000 units.
Describe the financial statement effects of making the purchase in 20x8 as opposed to 20x9. Argue for making the purchase during 20x8. Defend the use of LIFO. Use the matching concept in your defense.