Johnson Corporation began the year with inventory of 17,000 units of its only product. The units cost $8 each. The company uses a perpetual inventory system and the FIFO cost method. The following transactions occurred during the year: Purchased 85,000 additional units at a cost of $10 per unit. Terms of the purchases were 2/10, n/30, and 100% of the purchases were paid for within the 10-day discount period. The company uses the gross method to record purchase discounts. The merchandise was purchased f.o.b. shipping point and freight charges of $0.50 per unit were paid by Johnson. 1,700 units purchased during the year were returned to suppliers for credit. Johnson was also given credit for the freight charges of $0.50 per unit it had paid on the original purchase. The units were defective and were returned two days after they were received. Sales for the year totaled 80,000 units at $18 per unit. On December 28, Johnson purchased 5,700 additional units at $10 each. The goods were shipped f.o.b. destination and arrived at Johnsons warehouse on January 4 of the following year. 20,300 units were on hand at the end of the year.

1. For financial reporting purposes, the company uses LIFO (amounts based on a periodic inventory system). Record the year-end adjusting entry for the LIFO reserve, assuming the balance in the LIFO reserve at the beginning of the year is $16,400.