The Mick Company reported a LIFO cost of goods sold for the year of $100,000. The LIFO reserve decreased by $30,000 for the year. An estimate of the cost of goods sold under FIFO is:

Multiple Choice

$70,000.

$160,000.

$200,000.

$130,000.

The correct answer is D.

Explanation:

Giving the following information:

The LIFO (last-in, first-out) reserve is an account used to bridge the gap between FIFO (first-in, first-out) and LIFO costs.

To calculate the cost of goods sold (COGS) under FIFO, we need to use the following formula:

FIFO COGS = LIFO COGS - (ending LIFO reserve - beginning LIFO reserve)

FIFO COGS = 100,000 - (-30,000)

FIFO COGS = 100,000 + 30,000 = $130,000