Tyler Company Uses the Periodic Inventory System and Reported the Following

question 67

Essay

Tyler Company uses the periodic inventory system and reported the following summarized annual data at the end of 2022: $\begin{array}{lr}\text { Sales revenue } & \$ 1,000,000 \\\text { Cost of goods sold* } & 600,000 \\\text { Gross profit } & \$ 400,000 \\\end{array}$ *Based on an ending FIFO inventory of $240,000.
The controller of the company is considering a switch from FIFO to LIFO. He has determined that on a LIFO basis, the ending inventory would have been $150,000.
Instructions
(a) Restate the summary information on a LIFO basis.
(b) What effect, if any, would the proposed change have on Tyler's sales revenue and gross profit?
(c) If you were an owner of this business, what would your reaction be to this proposed change?

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Definitions:

Section 1221 Asset

Properties or assets, as defined by the IRS, that are used in a trade or business and are held for more than one year.

Rental Property

Real estate property leased or rented out to tenants, generating income for the owner.

Business Inventory

Items that are held by a business for the purpose of sale or production.

Trade or Business

An activity conducted for the purpose of earning income from selling goods or services, characterized by regularity and continuity.