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The Wheat Company has used the LIFO method for inventory valuation since the start of business 15 years ago. The current year ending inventory is $375,000. If the FIFO method of inventory had been used, the inventory would be $450,000. If Wheat Company had used the FIFO inventory method, pre-tax income would have been: Multiple Choice

Sagot :

Answer: $75,000 higher over the 15 year period.

Explanation:

Current year ending inventory using LIFO = $375,000

Current year ending inventory assuming FIFO was used = $450,000

If Wheat Company had used the FIFO inventory method, there will have been a difference of ($450,000 - $375,000) = $75,000 in pre-tax income over the 15 years period.

Therefore, if Wheat Company had used the FIFO inventory method, pre-tax income would have been $75,000 higher over the 15 year period.

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