LIFO/FIFO (Please help! Studying for CPA exam)


Joined
Nov 29, 2008
Messages
1
Reaction score
0
Hi guys! I'm studying for the CPA exam and cannot figure out this problem.

This is about Kroger Company.

Balance Sheet ($ in millions)

February 3, 2007 January 28. 2006

Current assets:
Inventories $4,609 $4,486


Income Statement ($ in millions)

For the Year Ended
February 3, 2007 January 28, 2006
Net Sales $66,111 $60,553
Cost of goods sold 50,115 45,565
Profit $15,996 $14,988

The significant accounting policies note disclosure contained the following:
Inventories (in part)
Inventories are stated at the lower of cost (principally on a last-in, first-out "LIFO" basis) or market. In total, approximately 98% of inventories were valued using the LIFO method. Cost for the balance of the inventories, including substantially all fuel inventories, was determined using the first-in, first-out ("FIFO") method. Replacement cost was higher than the carrying amount by $450 million at February 3, 2007 and $400 million at January 28, 2006.

1) Assuming that year-end replacement cost figures approximate FIFO inventory values, estimate what the beginning and ending inventory balances for the fiscal year ended 2/3/07 would have been if Kroger had used FIFO for all its inventories.

2) Estimate the effect on cost of goods sold (that is, would it have been graeater or less and by how much?) for the fiscal year ended 2/3/07 if Kroger had used FIFO for all of its inventories?

Thanks in advance,

Sarah
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top