Cabinets for Less uses FIFO for internal reporting purposes and LIFO for financial and income tax purposes. At the end of 2020, the following information was obtained from the inventory records: 20192020Ending inventory, FIFO$78,650$93,250Ending inventory, LIFO68,50078,350 Required: Prepare the necessary entry to convert to LIFO at the end of 2020.

LIFO reserve 2019=FIFO-LIFO=$78,650-68,500=$10,150LIFO reserve 2020=FIFO-LIFO=$93,250-78,350=$14,900 LIFO effect 2020= LIFO reserve 2020-LIFO reserve 2019=$14,900-$10,150=$4,750 Journal entry: Particulars Debit Credit Cost of goods sold $4,750 Allowance to reduce inventory to LIFO $4,750

Answered: Cabinets for Less uses FIFO for…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Cabinets for Less uses FIFO for internal reporting purposes and LIFO for financial and income tax purposes. At the end of 2020, the following information was obtained from the inventory records:

	2019	2020
Ending inventory, FIFO	$78,650	$93,250
Ending inventory, LIFO	68,500	78,350

	Required:
	Prepare the necessary entry to convert to LIFO at the end of 2020.

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