Question

Pernell Company reported LIFO reserves of $150,000 and $100,000 in 2016 and 2015, respectively. The company utilized the FIFO assumption for internal purposes. Based on this information, we can conclude that Pernell's cost of goods sold for the 2016 fiscal year would have been:

Answer 1

Answer:

If Pernell Company had used the first-in, first-out (FIFO) inventory valuation method, their cost of goods sold (COGS) would have been $50,000 less during 2016.

Since the company uses the last-in, first-out method, its inventory value for 2016 was $50,000 higher than if it had used the FIFO method. This type of situations are common since the COGS tend to increase over time.