A firm using FIFO had a beginning inventory of $48,000, an ending inventory of $56,000, and a pretax income of $400,000.If it had used LIFO, its beginning inventory would have been $20,000, its ending inventory would have been $16,000, and its pretax income would have been:

Question

Quizplus · Accepted Answer

To find the pretax income using LIFO, we need to adjust for the difference in inventory values between FIFO and LIFO.

The adjustment for the beginning inventory is $48,000 - $20,000 = $28,000.

The adjustment for the ending inventory is $56,000 - $16,000 = $40,000.

To get the adjusted pretax income using LIFO, we subtract the total adjustment of $28,000 + $40,000 = $68,000 from the pretax income using FIFO of $400,000.

Adjusted pretax income using LIFO = $400,000 - $68,000 = $332,000.

Therefore, the answer is B) $388,000.

A Firm Using FIFO Had a Beginning Inventory of $48,000