LIFO Reserve (LIFO Effect)
Vložit
- čas přidán 4. 06. 2015
- This video discusses the LIFO Reserve, also known as the LIFO effect. Some firms keep two sets of books, using FIFO to value inventory for internal reporting (used by managers) and FIFO to value inventory for external reporting (to prepare financial statements). In periods of rising prices FIFO results in higher inventory, so these firms must record an adjusting journal entry to reduce inventory to a LIFO basis. This video provides an example to show this LIFO Reserve is recorded.
-
Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education freely available to the world.
-
SUBSCRIBE FOR A FREE 53-PAGE GUIDE TO THE FINANCIAL STATEMENTS, PLUS:
• A 23-PAGE GUIDE TO MANAGERIAL ACCOUNTING
• A 44-PAGE GUIDE TO U.S. TAXATION
• A 75-PAGE GUIDE TO FINANCIAL STATEMENT ANALYSIS
• MANY MORE FREE PDF GUIDES AND SPREADSHEETS
* eepurl.com/dIaa5z
-
SUPPORT EDSPIRA ON PATREON
* / prof_mclaughlin
-
GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSET-LIABILITY MANAGEMENT
* edspira.thinkific.com
-
LISTEN TO THE SCHEME PODCAST
* Apple Podcasts: podcasts.apple.com/us/podcast...
* Spotify: open.spotify.com/show/4WaNTqV...
* Website: www.edspira.com/podcast-2/
-
GET TAX TIPS ON TIKTOK
* / prof_mclaughlin
-
ACCESS INDEX OF VIDEOS
* www.edspira.com/index
-
CONNECT WITH EDSPIRA
* Facebook: / edspira
* Instagram: / edspiradotcom
* LinkedIn: / edspira
-
CONNECT WITH MICHAEL
* Twitter: / prof_mclaughlin
* LinkedIn: / prof-michael-mclaughlin
-
ABOUT EDSPIRA AND ITS CREATOR
* www.edspira.com/about/
* michaelmclaughlin.com
Love the way you explained the material! Made it that much easier for me to understand the concept!
Interesting to see how the inventory accounting method can increase or decrease the taxes payable.
Thank you!!
thank you so much!
well explained, thanks.
thank you so much! :)
Big thumbs up!
thank you
very good
thank you sirrr
In a question that is only asking for the LIFO reserve, our answer would just be the 15,000, and no need for the AJE?
How would you find the LIFO reserve and LIFO effect on a question that had us use the dollar-value LIFO method?
why the volume is very low compare to normal youtube videos? am I the only one who has this problem?
Thank you for the video. I'm currently studying for the CPA and I'm stuck on the question below.
Would you be able to explain this?
The UNO Company was formed on January 2, year 1, to sell a single product. Over a 2-year period, UNO’s acquisition costs have increased steadily. Physical quantities held in inventory were equal to 3 months’ sales at December 31, year 1, and zero at December 31, year 2. Assuming the periodic inventory system, the inventory cost method which reports the highest amount for each of the following is
Answer : Inventory December 31, year 1 = FIFO
Cost of sales year 2 = FIFO
enjoy your explanation!! i have one question that at times of increase prices why the inventory at fifo increases
If you use FIFO, then the first items that were bought (at a lower cost) get sold first, so when prices increase, then the items that you bought recently (or lastly) have a higher price and therefore contribute to more Inventory in the books
FIFO states more relevant inventory market values on the B/S, where as LIFO states a more relevant COGS to the I/S
Is the LIFO Reserve also called the Allowance to Reduce Inventory to LIFO?
Yes, that is the journal entry. COGS Debit and Allowance to reduce Credit. Although I hope you already found out lol.
Why couldn't they just directly credit inventory?
You want to be able to track the differences between the LIFO and FIFO inventory. It's similar to accumulated depreciation. When you depreciate an asset, why do you credit accumulated depreciation instead of the asset? You want to track the total amount that has been depreciated over the years. These accounts are also included in the notes to the financial statements for investors.
Edspira From my understanding, depreciation is mainly recorded to match an expense with the revenue that a LTA is generating and also to avoid recording massive losses upon disposal if the net value of the asset was never reduced over its lifetime. What I don't understand about this specific concept is that the reserve is the difference between a company's internal and external inventory when FIFO is used for internal and LIFO for external. So with that being said, what benefit does disclosing this to external users provide? A company could use any method they want to value inventory for internal records. I'm not trying to argue, just trying to better understand. I get what we are doing but not really what this achieves.