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The Hasting Company began operations on January 1, 2013 and uses theFIFO method in costing its raw material inventory. An analyst is wondering what net income would have been if the company had consistently followed LIFO (instead of FIFO) from the beginning, 1/1/2013. He has the following information available to him:What would net income have been in 2014 if Hastings had used LIFO since 1/1/2013?a) -$ 110,000 b) -$ 150,000 c) -$ 170,000 d) -$ 230,000

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Answer:

b) $ 150,000

Explanation:

Calculation of Hasting Company net income in 2014

Particulars Amount ($)

Pretax Income under FIFO for 2014 170,000

Less:

12/31/2014 Final Inventory under FIFO 270,000

Add:

12/31/2014 Final Inventory under LIFO 210,000

Add:

12/31/2013 Final Inventory under FIFO 240,000

Less:

12/31/2013 Final Inventory under LIFO 200,000

Pretax Income under LIFO for 2014 150,000

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