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Cox Co. accounts for its inventory using the LIFO cost method. An inventory loss from a permanent market decline of $360,000 occurred in May. Cox appropriately recorded this loss in May after its March 31 quarterly report was issued. What amount of inventory loss should be reported in Cox’s quarterly income statement for the 3 months ended June 30?

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Answer:

$360,000

Explanation:

Last in first out (LIFO) is a method used in inventory where the cost of most recently purchased goods is the one to be expensed first. Also current losses are the first to be reported.

An inventory loss incurred in a quarter must not be deferred, but recorded as items within an interim must be reported in the same period they were incurred, unless it can be redeemed before the end of the fiscal year. It is not considered a temporary item.

The loss reported in May will be reported for that quarter in June.

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