Question

In 2017, a company shows inventory of $250,000 using LIFO. If the company had used FIFO, its inventories would have been higher by $40,000 and $30,000 in 2017 and 2016, respectively. How much is the company’s LIFO reserve in 2017?

Answer 1

Answer:

The answer is $40,000

Explanation:

LIFO reserve is the difference between the reported LIFO inventory amount and inventory amount that would have been reported if the FIFO method had been adopted That is:

FIFO inventory - LIFO inventory.

The question states: In 2017, If the company had used FIFO, its inventories would have been higher by $40,000. This is the difference between FIFO inventory and LIFO inventory..

Therefore, the company’s LIFO reserve in 2017 is $40,000