Does lifo provide a better matching of current costs to


The 2008 annual report of Sherwin Williams, a manufacturer of paint products, contained the following footnote (dollars in thousands).

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REQUIRED:

a. Sherwin Williams reported inventories on the balance sheet at $864,200 (2008), $887,465 (2007), and $825,179 (2006). Compute the company's ending inventory had it shifted to FIFO at the end of 2008 (dollars in thousands).

b. Estimate the taxes saved by Sherwin Williams because it uses LIFO instead of FIFO. Assume a tax rate of 33 percent.

c. Does LIFO provide a better matching of current costs to revenues in times of inflation? Why? Is the same true in times of deflation?

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Finance Basics: Does lifo provide a better matching of current costs to
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