Problem 8-7

The management of Riverbed Company has asked its accounting department to describe the effect upon the companys financial position and its income statements of accounting for inventories on the LIFO rather than the FIFO basis during 2017 and 2018. The accounting department is to assume that the change to LIFO would have been effective on January 1, 2017, and that the initial LIFO base would have been the inventory value on December 31, 2016. The following are the companys financial statements and other data for the years 2017 and 2018 when the FIFO method was employed.

		Financial Position as of
		12/31/16		12/31/17		12/31/18
Cash		$ 89,200		$130,000		$155,400
Accounts receivable		78,400		99,900		121,800
Inventory		121,800		137,200		178,100
Other assets		158,800		170,000		202,500
Total assets		$448,200		$537,100		$657,800
Accounts payable		$ 39,300		$ 59,800		$ 78,400
Other liabilities		66,600		72,300		112,300
Common stock		202,500		202,500		202,500
Retained earnings		139,800		202,500		264,600
Total liabilities and equity		$448,200		$537,100		$657,800

			Income for Years Ended
			12/31/17		12/31/18
Sales revenue			$891,000		$1,339,800
Less:	Cost of goods sold		504,500		752,700
	Other expenses		206,200		301,600
			710,700		1,054,300
Income before income taxes			180,300		285,500
	Income taxes (40%)		72,120		114,200
Net income			$108,180		$ 171,300

Other data:

1.		Inventory on hand at December 31, 2016, consisted of 41,200 units valued at $3 each.
2.		Sales (all units sold at the same price in a given year):
			2017-151,200 units @ $6 each				2018-181,200 units @ $7.70 each
3.		Purchases (all units purchased at the same price in given year):
			2017-151,200 units @ $3.60 each				2018-181,200 units @ $4.50 each
4.		Income taxes at the effective rate of 40% are paid on December 31 each year.

Name the account(s) presented in the financial statements that would have different amounts for 2018 if LIFO rather than FIFO had been used, and state the new amount for each account that is named.

Account		New amount for 2018
Other LiabilitiesCashOther ExpensesCommon StockAccounts PayableAccounts ReceivableCost of Goods SoldIncome TaxesRetained EarningsInventory		$
Retained EarningsIncome TaxesAccounts ReceivableAccounts PayableOther ExpensesCommon StockOther LiabilitiesCashCost of Goods SoldInventory
InventoryIncome TaxesRetained EarningsAccounts ReceivableOther LiabilitiesCost of Goods SoldOther ExpensesAccounts PayableCashCommon Stock
Other ExpensesAccounts ReceivableCost of Goods SoldRetained EarningsCommon StockIncome TaxesInventoryOther LiabilitiesAccounts PayableCash
Other ExpensesRetained EarningsAccounts PayableOther LiabilitiesAccounts ReceivableCashCommon StockIncome TaxesCost of Goods SoldInventory