CFA Practice Question
Given the following information, what is the FIFO Cost of Goods Sold?
LIFO COGS: $6,276 million
Beg. Inv. LIFO Reserve: $390 million
Ending Inv. LIFO Reserve: $459 million
Purchases: $793 million
LIFO COGS: $6,276 million
Beg. Inv. LIFO Reserve: $390 million
Ending Inv. LIFO Reserve: $459 million
A. $5,817 million
B. $6,207 million
C. $6,345 million
Explanation: FIFO COGS = LIFO COGS - (Ending Inv. LIFO Reserve - Beg. Inv. LIFO Reserve) = $6,276 million - ($459 million - $390 million) = $6,207 million
User Contributed Comments 6
| User | Comment |
|---|---|
| mtcfa | Easier formula: change in LIFO reserve = LIFO COGS - FIFO COGS |
| julamo | as far as i'm aware it's exactly the same formula as the one used in the answer. |
| BastianJB | why are purchases not relevant? |
| Dinosaur | the reserves take into account the purchases |
| dlukas | I remember it this way: FIFO inv. bal. = LIFO inv. bal + LIFO reserve Plus because you're calculating a positive balance in the inventory account. FIFO COGS = LIFO COGS - LIFO effect Minus because you're looking for the amount of inventory subtracted (sold) |
| farhan92 | while not as technically astute..I remember these formulas as End of year balance = Beginning balance + the rest of the crap that happened during the year. |