Analyzing Notes to Adjust Inventory from LIFO to FIFO
The following note was contained in a recent Ford Motor Company annual report:
NOTE 8. INVENTORIES—AUTOMOTIVE SECTOR Inventories at December 31 were as follows (dollars in millions) | ||
| Current Year | Previous Year |
Raw material, work in process.&supplies | $3,016 | $4,360 |
Finished products | 6,493 | 6,861 |
Total inventories at FIFO | 9,509 | 11,221 |
Less LIFO Adjustment | (891) | (1,100) |
Total | $8,618 | $10,121 |
About one-fourth of inv inventories were determined under the last-in, first-out method. | ||
Required:
1. What amount of ending inventory would have been reported in the current year if Ford had used only FIFO?
2. The cost of goods sold reported by Ford for the current year w as $127,103 million. Determine the cost of goods sold that would have been reported if Ford had used only FIFO for both years.
3. Explain why Ford management chose to use LIFO for certain of its inventories.
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