Problem 8-7

The management of Sweet 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

$130,600

$154,800

Accounts receivable

79,100

99,100

171,200

Inventory		171,200		142,300		178,200
Other assets		159,200		171,200		198,400
Total assets		$498,700		$543,200		$702,600
Accounts payable		$ 39,800		$ 61,100		$ 79,100
Other liabilities		122,800		85,300		161,100
Common stock		198,400		198,400		198,400
Retained earnings		137,700		198,400		264,000
Total liabilities and equity		$498,700		$543,200		$702,600

Income for Years Ended

12/31/17

12/31/18

Sales revenue			$1,069,600		$1,626,920
Less:	Cost of goods sold		496,600		742,400
	Other expenses		202,100		298,700
			698,700		1,041,100
Income before income taxes			370,900		585,820
	Income taxes (40%)		148,360		234,328
Net income			$222,540		$ 351,492

1.		Inventory on hand at December 31, 2016, consisted of 42,800 units valued at $4 each.
2.		Sales (all units sold at the same price in a given year):
			2017-152,800 units @ $7 each				2018-182,800 units @ $8.90 each
3.		Purchases (all units purchased at the same price in given year):
			2017-152,800 units @ $4.20 each				2018-182,800 units @ $5.20 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.

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.