On August 23, 2006 The Daily Oklahoman reported a change in the inventory accounting method used by LSB Industries. The company changed from "last in, first out," to "first in, first out" method of rotating inventory to use the oldest product first. Using LIFO, ending inventory is $30,000. Switching to FIFO, ending inventory would be calculated at $25,000, with $150,000 inventory available for sale. The change would not only be reflected on the balance sheet, the income statement would also show a change in cost of merchandise (goods) sold. This would also cause a change in net income, therefore having a bearing on taxes paid by the firm. (a) What would be the cost of merchandise sold using LIFO? (b) What would be the cost of merchandise sold using FIFO?
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