Extra Credit Questions for Exam II (8 points)
1. (3 points) The Konia Corporation used a periodic inventory system and the LIFO cost
flow method to account for its inventory. The beginning inventory of year 2010
consisted of the following:
10,000 units @ $13
15,000 units @ $15
During year 2010, the purchases are as follows:
30,000 units @$18
70,000 units @$20
Sales of year 2010 totaled 120,000 units at various prices, leaving 5,000 units in
ending inventory. What is the amount of LIFO liquidation profit that the
company must report in the footnote disclosure to its financial statements of year
2010? Assume an income tax rate of 30%.
2. (3 oints) The Following disclosure note is available in Greenway Corporation’s 2010
annual report:
December 31, 2010
Inventory stated at FIFO cost
Reserve for LIFO valuation
2010
$300,000
2009
$257,000
(30,000)
(18,000)
How much higher would the income number of 2010 be if Greenway had used
the FIFO inventory method instead of LIFO given an income tax rate of 30%?
3. (2 points) Using information in question 2, what is the inventory stated at LIFO for
2010?