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What problem is created by the use of lifo in this situation

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Reference no: EM131000681

The Reuschel Company began 2011 with inventory of 10,000 units at a cost of $7 per unit. During 2011, 50,000 units were purchased for $8.50 each. Sales for the year totaled 54,000 units leaving 6,000 units on hand at the end of 2011. Reuschel uses a periodic inventory system and the LIFO inventory cost method.

Required:

1. Calculate cost of goods sold for 2011.

2. From a financial reporting perspective, what problem is created by the use of LIFO in this situation? Describe the disclosure required to report the effects of this problem. 

Reference no: EM131000681

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