PART II: Caterpillar – uses LIFO to value its ending inventory and cost of goods sold The following data was collected from Caterpillar's 10-K filed with the SEC. in the table below 2021 2020 2019 Sales 50,971 41,748 53,800 LIFO cost of goods sold (COGS) 35,513 29,082 36,630 LIFO Net Income 6,493 3,003 6094 LIFO ending inventory - Balance Sheet 14,038 11,402 11,266 LIFO reserve from Note 1 2,599 2,132 2,086 Total assets 82,793 78,324 78,453 Calculations to convert LIFO to FIFO: Please fill in the following amounts: FIFO Inventory = LIFO inventory + LIFO Reserve Remember FIFO inventory > LIFO inventory FIFO Assets = LIFO Assets + LIFO Reserve Increase in LIFO Reserve during the year FIFO COGS = LIFO COGS - Increase in LIFO Reserve Remember FIFO COGS expense < LIFO COGS expense After-tax effect of LIFO = (1 -21%) × Increase in LIFO Reserve FIFO Net income = LIFO Net income + After-tax effect of LIFO Remember FIFO net income > LIFO net income 2021 2020 2019 9,336 8,437 85,392 80,456 80,539 467 46 N/A 35,046 29,036 N/A 369 36 N/A 6,862 3,039 N/A 1) 3y how much would have ending inventory increased in 2021 if the FIFO costing method had been used instead of LIFO?
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Inventories, which consist of merchandise and fuel, are stated at the lower of cost or market. For fuel, cost is determined through the use of the first-in, first-out (FIFO) method. For merchandise inventories, cost is determined through the use of the last-in, first-out (LIFO) method. The excess of replacement cost over the stated LIFO value was $105,055 and $96,977 at April 30, Year 2 and Year 1, respectively. There were no material LIFO liquidations during the period presented. Below is a summary of the inventory values at April 30, Year 2 and Year 1. Years Ended April 30, ($ thousands) Year 2 Year 1 Fuel $43,804 $108,165 Merchandise 242,774 227,803 Total Inventory $286,578 $335,968 In Year 2, Michael's Merchants reported sales revenue of $11,927.9 million and cost of goods sold of $8,436.7 million. a. Calculate the amount of inventories purchased by Michael's Merchants in Year 2. Round intermediate calculations and answers to one decimal place. $Answer million. b. What amount of gross profit would Michael's Merchants have reported if the FIFO method had been used to value all inventories in Year 2. Round intermediate calculations and answer to one decimal place. $Answer c. Calculate the gross profit margin (GPM) as reported and assuming that the FIFO method had been used to value all inventories. Round answers to two decimal places (i.e., 0.15785 = 15.79%) As reported Answer% Under FIFO Answer%
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Using the LIFO method, complete the steps below to calculate the ending inventory units, inventory account balance, and cost of goods sold account balance at the end of the period. Date Activity Units Purchase Price (per unit) Sale Price (per unit) 1-Feb Beginning Inventory 100 $ 45 15-Feb Purchase 700 $ 52 9-Apr Sale 1 600 $ 90 29-May Purchase 500 $ 56 10-Jul Sale 2 600 $ 90 10-Sep Purchase 400 $ 58 15-Oct Sale 3 400 $ 90 5-Nov Purchase 900 $ 62 18-Dec Sale 4 200 $ 90 1. Compute the Cost of Goods Sold and ending inventory (units and value) after Sale 1. Must show each component of the calculation on a separate line. Refer to the Excel examples. (3 points total. For all calculations, you must use a formula in the cell to get full credit). Cost of Goods Sold Total COGS after Sale 1 Inventory Remaining Total Inventory Balance after Sale 1 Totals: 2. Compute the Cost of Goods Sold and ending inventory (units and value) after Sale 2. Must show each component of the calculation on a separate line. Refer to the Excel examples. (3 points total. For all calculations, you must use a formula in the cell to get full credit). Cost of Goods Sold Total COGS after Sale 2 Inventory Remaining Total Balance after Sale 2 Totals: 3. Compute the Cost of Goods Sold and ending inventory (units and value) after Sale 3. Must show each component of the calculation on a separate line. Refer to the Excel examples. (3 points total. For all calculations, you must use a formula in the cell to get full credit). Cost of Goods Sold Total COGS after Sale 3 Inventory Remaining Total Balance after Sale 3 Totals: 4. Compute the Cost of Goods Sold and ending inventory (units and value) after Sale 4. Must show each component of the calculation on a separate line. Refer to the Excel examples. (3 points total. For all calculations, you must use a formula in the cell to get full credit). Cost of Goods Sold Total COGS after Sale 4 Inventory Remaining Total Balance after Sale 4 Totals: 5. Calculate the values below (3 points total. For all calculations, must use a formula in the cell to get full credit) Ending inventory units: Ending inventory account balance: Cost of Goods Sold account balance:
The beginning inventory of merchandise at Dunne Co. and data on purchases and sales for a three-month period ending June 30 are as follows: 1) Record the inventory, purchases, and cost of merchandise sold data to a perpetual inventory record using the first-in, first-out method. Under FIFO, if units are in inventory at two different costs, enter the units with the lower cost first in the cost of merchandise sold unit cost column and in the inventory unit cost column. 2) Determine the total sales and the total cost of merchandise sold for the period. Journalize the entries in the sales and the cost of merchandise sold accounts. Assume that all sales were on account. 3) Determine the gross profit from the sales for the period. 4) Determine the ending inventory cost as of June 30. 5) Based upon the preceding data, would you expect the inventory using the last in, first out method to be higher or lower? FIFO Perpetual Inventory The beginning inventory of merchandise at Dunne Co. and data on purchases and sales for a three-month period ending June 30 are as follows: Date Transaction Number of Units Per Unit Total Apr. 3 Inventory 36 $525 $18,900 8 Purchase 72 630 45,360 11 Sale 48 1,750 84,000 30 Sale 30 1,750 52,500 May 8 Purchase 60 700 42,000 10 Sale 36 1,750 63,000 19 Sale 18 1,750 31,500 28 Purchase 60 770 46,200 June 5 Sale 36 1,840 66,240 16 Sale 48 1,840 88,320 21 Purchase 108 840 90,720 28 Sale 54 1,840 99,360 Required: 1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual FIFO. If units are in inventory at two different costs, enter the units with the lower cost first in the cost of merchandise sold unit cost column and in the inventory unit cost column.
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