Question 1

Sunset Corp. has the following information regarding its inventory:
- Beginning inventory (FIFO): $180,000
- Purchases during the year: $850,000
- Ending inventory (FIFO): $220,000
- Sales: $1,400,000

If Sunset had used LIFO instead of FIFO, ending inventory would have been $195,000. What would cost of goods sold have been under LIFO?

Accepted Answer

Use the basic inventory equation: Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold. For LIFO calculation, use the LIFO ending inventory amount provided.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Using FIFO ending inventory instead of LIFO ending inventory, adjusting beginning inventory unnecessarily, or confusing the inventory equation

How to approach this question

Full Answer

Common mistakes

Practice the full CPA FAR Practice Exam 2

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