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Problem 1: Adjusting from LIFO to FIFO

The following information represents inventories detail included in

Note 6 to the consolidated financial


statements of Hog at December 31, 2018:


6. Additional Balance Sheet and Cash Flow Information


The following information represents additional detail for selected line items included in the consolidated


balance sheets at December 31, and the statements of cash flows for the years ended December 31.


Balance Sheet Information:


Inventories, net (in thousands):


2018


2017


Raw materials and work in process


$177,110


$ 161,664


Motorcycle Finished goods


301,630


289,530


Part and accessories and general merchandise


136,027


139,363


Inventory at lower of FIFO cost or net realizable value


614,767


590,557


Excess of FIFO over LIFO cost (LIFO RESERVE)


(58,639)


(52,355)


Total inventories, net (amount reported on balance sheet)


$ 556,128


$ 538,202


Inventory obsolescence reserves deducted from FIFO cost were $39.0 million and $38.7 million as of


December 31, 2018 and 2017, respectively


a. Assume the tax rate is 24%, what is the balance sheet adjustment for 2018? Show your work


b. Assume the tax rate is 24%, what is the income statement adjustment for 2013? Show your


work

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