Question
At the end of the annual accounting period, the inventory records of Boton Company show the following. The company uses FIFO for internal purposes and
At the end of the annual accounting period, the inventory records of Boton Company show the following. The company uses FIFO for internal purposes and LIFO for income tax and external reporting purposes.
2020 | 2021 | |
---|---|---|
Ending inventory at FIFO | $120,000 | $216,000 |
Ending inventory at LIFO | 48,000 | 84,000 |
a. Assume that the inventory difference is recognized in the accounts, and the balance in the allowance account was zero at the beginning of 2020. Provide the necessary journal entry at year-end 2020 and 2021.
Date | Account Name | Dr. | Cr. |
---|---|---|---|
Dec. 31, 2020 | AnswerCashAccounts ReceivableInventoryAllowance to Reduce FIFO Inventory to LIFO BasisAccounts PayableDeferred RevenueSales RevenueCost of Goods SoldFreight-inPurchasesPurchase DiscountsPurchase Returns and AllowancesInterest ExpenseN/A | Answer | Answer |
AnswerCashAccounts ReceivableInventoryAllowance to Reduce FIFO Inventory to LIFO BasisAccounts PayableDeferred RevenueSales RevenueCost of Goods SoldFreight-inPurchasesPurchase DiscountsPurchase Returns and AllowancesInterest ExpenseN/A | Answer | Answer | |
Dec. 31, 2021 | AnswerCashAccounts ReceivableInventoryAllowance to Reduce FIFO Inventory to LIFO BasisAccounts PayableDeferred RevenueSales RevenueCost of Goods SoldFreight-inPurchasesPurchase DiscountsPurchase Returns and AllowancesInterest ExpenseN/A | Answer | Answer |
AnswerCashAccounts ReceivableInventoryAllowance to Reduce FIFO Inventory to LIFO BasisAccounts PayableDeferred RevenueSales RevenueCost of Goods SoldFreight-inPurchasesPurchase DiscountsPurchase Returns and AllowancesInterest ExpenseN/A | Answer | Answer |
b. Show how inventory should be shown on its 20202021 comparative balance sheets.
Balance Sheet, Dec 31 | 2020 | 2021 |
---|---|---|
Current Assets | ||
Inventory | Answer | Answer |
c. If the company reported cost of goods sold of $576,000 in 2021 using LIFO, what would cost of goods sold be using FIFO?
$Answer
PreviousSave AnswersNext
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started