Free CFA Certification Practice Questions:


Furniture Surplus Inc. uses the LIFO inventory cost flow assumption. If the COGS under FIFO for 2009 is $12,500,000, what is the ending inventory balance in 2009?





A) $3,000,000

B) $4,000,000

C) $4,500,000

  • [Ans: B]



    • 1) Calculate 2009 LIFO COGS as follows:

    COGS = (Beginning Inventory + Purchases - Ending Inventory)

    =11,000,000 + 7,000,000 - X = 18,000,000 - X , where X = Ending Inventory



    2) Solve for ending inventory as follows:

    FIFO COGS = (LIFO COGS) - (Ending LIFO Reserve - Beginning LIFO Reserve)

    12,500,000 = (18,000,000 - X) - (4,500,000 - 3,000,000)

    14,000,000 = 18,000,000 - X

    X = 4,000,000





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