Exhibit 7-5 Sullivan Produce Co

question 17

Multiple Choice

Exhibit 7-5 Sullivan Produce Co. switched from FIFO to LIFO on January 1, 2013, for external reporting and income tax purposes, while retaining FIFO for internal reports. On that date, the FIFO inventory equaled $360,000. The ensuing three-year period resulted in the following:
-Refer to Exhibit 7-5. The ending inventory at December 31, 2014, using the dollar-value LIFO method would be

• A) $400,000
• B) $402,000
• C) $406,000
• D) $424,000

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Definitions:

Gain on Sale

The profit realized from the sale of assets other than inventory, calculated as the sale proceeds minus the carrying value of the asset sold.

Debt Investments

Financial assets purchased with the expectation that the investment will generate interest income and be repaid in the future.

Interest Accrual

The recognition of interest earned or payable that has accumulated but not yet been recorded or paid.

Debt Investments

Investments made by purchasing bonds or other debt instruments, with the expectation of earning interest income and the return of principal.