P8-7 (Financial Statement Effects of FIFO and LIFO) The management of Tritt Company has asked its accounting department to describe the effect upon the company's financial position and its income statements of accounting for inventories on the LIFO rather than the FIFO basis during 2010 and 2011. The accounting department is to assume that the change to LIFO would have been effective on January 1, 2010, and that the initial LIFO base would have been the inventory value on December 31, 2009. Pre- sented below are the company's financial statements and other data for the years 2010 and 2011 when the FIFO method was employed. Cash Accounts receivable Inventory Other assets Total assets Accounts payable Other liabilities Common stock Retained earnings Total liabilities and equity Sales Less: Cost of goods sold Other expenses Income before income taxes Income taxes (40%) Net income Other data: Financial Position as of 12/31/09 $ 90,000 80,000 120,000 160,000 $450,000 $ 40,000 70,000 200,000 140,000 $450,000 12/31/10 $130,000 100,000 140,000 170,000 $540,000 $ 60,000 80,000 200,000 200,000 $540,000 12/31/11 154,000 120,000 176,000 200,000 650,000 80,000 110,ooo 200,000 260,000 650,000 Income for Years Ended 12/31/10 $900,000 505,000 205,000 710,000 190,000 76,000 $114,000 12/31/11 756,000 304,000 290,000 116,000 174,000 1. 2. 3. 4. Inventory on hand at December 31, 2009, consisted of 40,000 units valued at $3.00 each. Sales (all units sold at the same price in a given year): units @ $6.00 each units @ $7.50 each Purchases (all units purchased at the same price in given year): units @ $3.50 each units @ $4.40 each Income taxes at the effective rate of 40% are paid on December 31 each year. Instructions Name the account(s) presented in the financial statements that would have different amounts for 2011 if LIFO rather than FIFO had been used, and state the new amount for each account that is named. Show computations. (CMA adapted)