Convert LIFO to FIFO statement

4 steps to convert a LIFO-based statement to a FIFO-based statement:

  1. Add the LIFO reserve to LIFO inventory
  2. Deduct the excess cash saved from lower taxes under LIFO (i.e. LIFO Reserve x Tax rate)
  3. Increase the retained earnings component of shareholders’ equity by the LIFO reserve x (1-T)
  4. In the income statement, FIFO COGS = LIFO COGS – Δ LIFO Reserve
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