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Converting FIFO Inventory to Dollar-Value LIFO and Preparing Year-End Adjustments to the LIFO Reserve Stetson Industries has been using FIFO for all internal and external reporting purposes. At the start of Year 5, the company adopted dollar-value LIFO for external financial statement and income tax purposes. Its derived internal price indices are: Year 4 is 1.00; Year 5 is 1.10; Year 6 is 1.15; and Year 7 is 1.20. The FIFO inventory records show the following for its single inventory pool. Year Year 4 Ending Inventory Year 5 Ending Inventory Year 6 Ending Inventory Year 7 Ending Inventory FIFO Basis $600,000 699,500 855,600 864,000

Converting FIFO Inventory to Dollar-Value LIFO and Preparing Year-End Adjustments to the LIFO Reserve Stetson Industries has been using FIFO for all internal and external reporting purposes. At the start of Year 5, the company adopted dollar-value LIFO for external financial statement and income tax purposes. Its derived internal price indices are: Year 4 is 1.00; Year 5 is 1.10; Year 6 is 1.15; and Year 7 is 1.20. The FIFO inventory records show the following for its single inventory pool. Year Year 4 Ending Inventory Year 5 Ending Inventory Year 6 Ending Inventory Year 7 Ending Inventory FIFO Basis $600,000 699,500 855,600 864,000

FINANCIAL ACCOUNTING
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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1.Please Complete Solution With Details 2.Final Answer Clearly Mentioned 3.Do not give solution in image format
Converting FIFO Inventory to Dollar-Value LIFO and Preparing Year-End Adjustments to the LIFO Reserve Stetson Industries has been using FIFO for all internal and external reporting purposes. At the start of Year 5, the company adopted dollar-value LIFO for external financial statement and income tax purposes. Its derived internal price indices are: Year 4 is 1.00; Year 5 is 1.10; Year 6 is 1.15; and Year 7 is 1.20. The FIFO inventory records show the following for its single inventory pool. FIFO Basis $600,000 699,600 855,600 864,000 Year Year 4 Ending Inventory Year 5 Ending Inventory Year 6 Ending Inventory Year 7 Ending Inventory
Transcribed Image Text:Converting FIFO Inventory to Dollar-Value LIFO and Preparing Year-End Adjustments to the LIFO Reserve Stetson Industries has been using FIFO for all internal and external reporting purposes. At the start of Year 5, the company adopted dollar-value LIFO for external financial statement and income tax purposes. Its derived internal price indices are: Year 4 is 1.00; Year 5 is 1.10; Year 6 is 1.15; and Year 7 is 1.20. The FIFO inventory records show the following for its single inventory pool. FIFO Basis $600,000 699,600 855,600 864,000 Year Year 4 Ending Inventory Year 5 Ending Inventory Year 6 Ending Inventory Year 7 Ending Inventory
b. Prepare the December 31 year-end journal entry for Year 5, Year 6, and Year 7, to convert inventory from FIFO to LIFO. Date Dec. 31, Year 5 Inventory Allowance to Reduce FIFO Inventory to LIFO Basis To adjust LIFO Reserve Dec. 31, Year 6 Inventory Account Name Allowance to Reduce FIFO Inventory to LIFO Basis To adjust LIFO Reserve Dec. 31, Year 7 Inventory Allowance to Reduce FIFO Inventory to LIFO Basis To adjust LIFO Reserve Dr. 69,960 0 41,750 0 43,200 0 Cr. 0x 69,960 * 0x 41,750 * 0x 43,200 *
Transcribed Image Text:b. Prepare the December 31 year-end journal entry for Year 5, Year 6, and Year 7, to convert inventory from FIFO to LIFO. Date Dec. 31, Year 5 Inventory Allowance to Reduce FIFO Inventory to LIFO Basis To adjust LIFO Reserve Dec. 31, Year 6 Inventory Account Name Allowance to Reduce FIFO Inventory to LIFO Basis To adjust LIFO Reserve Dec. 31, Year 7 Inventory Allowance to Reduce FIFO Inventory to LIFO Basis To adjust LIFO Reserve Dr. 69,960 0 41,750 0 43,200 0 Cr. 0x 69,960 * 0x 41,750 * 0x 43,200 *
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