Blue Company uses the LIFO method for financial reporting purposes but FIFO for internal reporting purposes. At January 1, 2020, the LIFO reserve has a credit balance of $1,106,700. At December 31, 2020, Blue's internal reports indicated that the FIFO inventory balance was $2,828,000 and for external reporting purposes the LIFO inventory balance was $1,614,600. (a) Your answer is correct. What is the amount of the LIFO reserve and the LIFO effect related to 2020? LIFO reserve at December 31, 2020 2$ 1213400 LIFO effect for 2020 2$ 106700 eTextbook and Media List of Accounts Attempts: 1 of 5 used (b) What is the journal entry needed to record the LIFO effect at December 31, 2020? (If no entry is required, select "No entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31, 2020

Blue Company uses the LIFO method for financial reporting purposes but FIFO for internal reporting purposes. At January 1, 2020, the LIFO reserve has a credit balance of $1,106,700. At December 31, 2020, Blue's internal reports indicated that the FIFO inventory balance was $2,828,000 and for external reporting purposes the LIFO inventory balance was $1,614,600. (a) Your answer is correct. What is the amount of the LIFO reserve and the LIFO effect related to 2020? LIFO reserve at December 31, 2020 2$ 1213400 LIFO effect for 2020 2$ 106700 eTextbook and Media List of Accounts Attempts: 1 of 5 used (b) What is the journal entry needed to record the LIFO effect at December 31, 2020? (If no entry is required, select "No entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31, 2020

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Richardson's Flower Depot uses FIFO for internal reporting purposes and LIFO for financial

A: the steps for converting from FIFO to LIFO will vary depending on the specific business and…

Q: Volata Company began operations on January 1, 2019. In the second quarter of 2020, it adopted the…

A: The amount that remains after expenses, benefits, and taxes are subtracted from the earnings of a…

Q: The dollar-value LIFO method was adopted by Crane Corp. on January 1, 2020. Its inventory on that…

A: ENDING INVENTORY USING DOLLAR - VALUE LIFO METHOD : = INVENTORY LEVEL / PRICE LEVEL

Q: Sarasota Enterprises Ltd. 's records reported an inventory cost of $ 56, 500 and a net realizable…

A: Inventory is the aggregate term for all goods, resources, and products that a business maintains in…

Q: Whispering Company uses the LIFO method for financial reporting purposes but FIFO for internal…

A: LIFO reserve is the difference between FIFO inventory cost and LIFO inventory cost. LIFO effect is…

Q: The management of Knight Company has asked its accounting department to describe the effect upon the…

A: It is the stock held for sale to customers. The inventory comprises of raw materials, work in…

Q: The following is a portion of the current asset section of the balance sheets of HiROE Co., at…

A: The accounts receivable balance is higher in the year 2020 which means the customers are paying…

Q: The Pyramid Company has used the LIFO method of accounting for inventory during its first two years…

A: Golden Rules of Accounting: Account Debit Credit Personal Accounts The Receiver The…

Q: Naylor, Inc. uses a perpetual inventory system. It records its inventory at lower-of-cost-or-net…

A: Lower of Cost or Net Realizable Value (NRV) Method: This is a method of recording ending inventory…

Q: Company A uses the FIFO method for internal reporting purposes and LIFO for external reporting…

A: FIFO and LIFO are the inventory methods used to value the cost of closing stock or inventory at the…

Q: n June 15, 2022, Lucas Corporation accepted delivery of merchandise which it purchased on account.…

A: Purchase of inventory on account results in: Increase is Assets by the purchase price as inventory…

Q: Volata Company began operations on January 1, 2019. In the second quarter of 2020, it adopted the…

A: Deciding how much money to put into a company's inventory is known as inventory valuation. In order…

Q: At December 31, 2025, Sorrento Inc. estimated bad debts as 3% of the outstanding balance of Accounts…

A: The concept of estimating bad debts is rooted in the accounting principle of conservatism, which…

Q: Wolfpack Corp. has the following normal account balances on 12/31/22 before the year-end adjustment…

A: Inventory: Inventory in accounting terms can be explained as inputs like raw materials, parts,…

Q: Sunland Company uses the FIFO method for internal reporting purposes and LIFO for external reporting…

A: Cost of goods sold in the 2021 income statement = Cost of goods sold account balance from sales…

Q: At December 31, 2019, Stacy McGill Corporation reported current assets of $370,000 and current…

A: a. Compute the current ratio based on McGill's balance sheet.

Q: In 2021, the internal auditors of Development Technologies, Inc., discovered that a $5.6 million…

A: Given that, During the audit of 2021, $5.6 Million purchase of merchandise in 2021 was recorded in…

Q: Skysong Company uses the LIFO method for financial reporting purposes but FIFO for internal…

A: LIFO: LIFO stands for Last in First out. While making inventory valuations the last received…

Question

Blue Company uses the LIFO method for financial reporting purposes but FIFO for internal reporting purposes. At January 1, 2020,
the LIFO reserve has a credit balance of $1,106,700. At December 31, 2020, Blue's internal reports indicated that the FIFO
inventory balance was $2,828,000 and for external reporting purposes the LIFO inventory balance was $1,614,600.
(a)
Your answer is correct.
What is the amount of the LIFO reserve and the LIFO effect related to 2020?
LIFO reserve at December 31, 2020
1213400
LIFO effect for 2020
106700
eTextbook and Media
List of Accounts
Attempts: 1 of 5 used
(b)
What is the journal entry needed to record the LIFO effect at December 31, 2020? (If no entry is required, select "No entry" for the
account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent
manually.)
Date
Account Titles and Explanation
Debit
Credit
Dec. 31,
2020
%24
%24

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

For the year ended 31/12/2020, the financial statements of ABC Company were authorized for issue on 31/3/2021. On 31/12/2020, ABC reported inventory in its Balance Sheet at NRV ($7000) since the cost was $10000. On 17/2/2021, ABC entered into an agreement to sell the entire inventory to a customer for $7700 (immaterial) How should IAS 10 account for this event? Select one: a. Disclosure in the notes b. Accounts receivable Sales revenue C. NO Action d. Inventory Cost of goods sold e. All answers are false f. Loss on Inventory write-down Inventory g. Inventory 7700 h. Cost of goods sold Inventory 700 2300 700 Gain on reversal of Inventory write- down 2300 7700 700 2300 700 2300
Vader Corporation made two errors in counting inventory: Ending inventory for 2019 was overstated by $15,000, and ending inventory for 2020 was understated by $12,000. If neither error was corrected, what will be the error (before taxes) in 2020 net income? a.Overstated $27,000. b.Understated $27,000. c.Overstated $3,000. d.Understated $3,000.
You are examining the financial statements of France Company for the year ended December 31, 2022. It uses the physical inventory system of accounting for inventory. During your examination, you discovered that the 2023 sales of P 120,000 were recorded in 2022; goods were excluded in the 2022 ending inventory at a cost of 70,000. Based on the foregoing, answer the following questions: Question 1: Which of the following accounts is(are) overstated by P 120,000 at the end of year 2022 as a result of the error? Select 1 sales Onlv a. Sales and Accounts Receivable b. Inventory, December 31, 2022 only c. Retained Earnings only Question 2: Which of the following accounts is (are) understated by p 70,000 at the end of year 2022 as a result of the error? Select 1 a. retained earnings b. inventory, december 31,2022 c. sales and accounts receivable d. sales and retained earnings
Mikrokosmos Co. prepared its annual financial statements on a calendar-year basis. In 2020, Mikrokosmos Co. experience an impairment in its inventory. Their inventories (which cost P1,320,000) only have a net realizable value of P1,100,000. As a matter of policy, they record any write-downs in inventory as part of “Loss on Inventory Writedown” (LIW) and uses an allowance account as a valuation account for inventory. During 2021, the same cost of inventories further went down to only 1,050,000 net realizable value. Which among the following best describes the journal entry for the impairment at year 2021? A. A debit to LIW and credit to Allowance for Inventory Writedown, P170,000 B. A debit to Allowance for Inventory Writedown and credit to LIW, P50,000 C. A debit to Allowance for Inventory Writedown and credit to LIW, P170,000 D. A debit to LIW and credit to Allowance for Inventory Writedown, P50,000
What is the adjusted net income of the firm for the year ended December 31, 2021?
McLelland Inc. reported net income of $150,000 for 2019 and $165,000 for 2020. Early in 2020, McLelland discovers that the December 31, 2019 ending inventory was overstated by $7,700. For simplicity, ignore taxes. Required: 1. What is the correct net income for 2019? For 2020? Net Income 2019 2020 2. Assuming the error was not corrected, what is the effect on the balance sheet at December 31, 2019? At December 31, 2020? December 31, 2019 December 31, 2020
At December 31, 2020, Sandhill’s Mercantile has Cost of Goods Sold of $50800 before adjusting entries are recorded. The physical count of inventory indicates that the actual inventory amount is $1500 less than the balance in the Inventory account. What balance will the company report for Cost of Goods Sold on the 2020 income statement? $49300.$50800.$52300.$53800.
Sampress, Inc., reported inventory in the 2020 year-end balance sheet, using the average cost method, as $342,000. In 2021, the company decided to change its inventory method to FIFO. If the company had used the FIFO method in 2020, ending inventory would have been $367,000. What adjustment would Sampress make for this change in inventory method?
Gatsby, Inc. owed $500,000 on account for inventory purchased on November 1, 2020. The company's fiscal year ends on December 31. Gatsby was unable to pay the amount owed by February 1, 2021 due date because of financial difficulties experienced in early 2021. On February 1, 2021, it signed a $500,000, 10% interest- bearing note. This note was repaid with interest on September 1, 2021. How much interest should Gasby recognize on September 1, 2021 (enter your answer in whole dollars, no comma or dollar sign)?
Adjusto Corporation (which is on a December 31 fiscal year-end) engaged in the following transactions during 2019 and 2020: 2019 Nov. 1 Issued a 120-day, 12% note, face value of $20,000, to Johnson Company to settle an open account of that amount. Dec. 1 Issued a 90-day, 12% note, face value of $32,000, to Winslow Corporation for the purchase of merchandise (the perpetual inventory method is used). 2020 Mar. 1 Paid the principal and interest on both the Johnson and the Winslow notes. Required: Prepare journal entries to record the preceding transactions on Adjusto’s books, including the adjusting entries at the end of 2019. Assume a 360-day year.
During 2021, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts:2019 understated by $120,0002020 overstated by 150,000WMC uses the periodic inventory system and the FIFO cost method.Required:1. Determine the effect of these errors on retained earnings at January 1, 2021, before any adjustments. (Ignore income taxes.)2. Prepare a journal entry to correct the error in 2021.3. Will WMC account for the error (a) retrospectively or (b) prospectively?
You are looking into the accounts of a company that has presented using LIFO for inventory. You see in the notes the LIFO Reserve in 2019 and 2020 were 160,000 and 240,000 respectively. The company pays tax at 30% in both years. Show the relevant adjustments you would have to make to the Balance Sheet and income statement to convert the company to a FIFO basis. Describe the effect that this conversion would have on net profit margin, gross profit margin, debt to equity, inventory turnover and current ratio in 2020. Another company has written down some inventory. Explain why a company would need to write down inventory and the effects this would have on the company accounts.