Question

A company uses LIFO. At the beginning of the current year its inventory was $225,000, and at the end of the current year its inventory is $300,000. At the start of the year its LIFO reserve was $20,000 and at the end of the year its LIFO reserve is $25,000. The company operates in an inflationary environment. If the company used FIFO instead of LIFO, its ending inventory would be:

Answer 1

LIFO reserve is the difference between the cost of inventory of LIFO and FIFO. A LIFO reserve of $25,000 indicates that if the company used FIFO the inventory would be $25,000 more than using LIFO. So in this case the current year ending inventory would be $325,000 if the company used FIFO.

Step-by-step explanation: