Question

The management of Tritt Company has asked its accountingdepartment to describe the effect upon the company’s financialposition and its income statements of accounting for inventories onthe LIFO rather than the FIFO basis during 2014 and 2015. Theaccounting department is to assume that the change to LIFO wouldhave been effective on January 1, 2014, and that the initial LIFObase would have been the inventory value on December 31, 2013.Presented below are the company’s financial statements and otherdata for the years 2014 and 2015 when the FIFO method wasemployed.

 

 

Financial Position as of

 

 

12/31/13

 

12/31/14

 

12/31/15

Cash

 

$ 91,490

 

$131,110

 

$155,320

Accounts receivable

 

81,540

 

101,260

 

121,910

Inventory

 

121,910

 

141,520

 

177,840

Other assets

 

161,580

 

171,720

 

201,810

   Total assets

 

$456,520

 

$545,610

 

$656,880

Accounts payable

 

$ 41,510

 

$ 61,380

 

$ 81,540

Other liabilities

 

71,750

 

80,610

 

112,350

Common stock

 

201,810

 

201,810

 

201,810

Retained earnings

 

141,450

 

201,810

 

261,180

   Total liabilities and equity

 

$456,520

 

$545,610

 

$656,880

             

 

 

 

 

Income for Years Ended

 

 

 

12/31/14

 

12/31/15

Sales revenue

 

$1,085,725

 

$1,613,560

Less:

Cost of goods sold

 

506,900

 

766,700

 

Other expenses

 

205,500

 

305,000

 

 

 

712,400

 

1,071,700

Income before income taxes

 

373,325

 

541,860

 

Income taxes (40%)

 

149,330

 

216,744

Net income

 

$223,995

 

$ 325,116

           

 

Other data:

1.

 

Inventory on hand at December 31, 2013, consistedof 48,500 units valued at $3.42 each.

2.

 

Sales (all units sold at the same price in a givenyear):

 

 

 

 

 

 

 

 

 

 

 

 

 

2014-158,500 units

 

 

 

2015-188,500 units

 

 

 

 

 

 

 

 

 

 

 

 

3.

 

Purchases (all units purchased at the same price ingiven year):

 

 

 

 

 

 

 

 

 

 

 

 

 

2014-158,500 units

@

$3.99 each

 

2015-188,500 units

@

$5.02 each

 

 

 

 

 

 

 

 

 

 

4.

 

Income taxes at the effective rate of 40% are paidon December 31 each year.

                   

 

Name the account(s) presented in the financial statements thatwould have different amounts for 2015 if LIFO rather than FIFO hadbeen used, and state the new amount for each account that isnamed