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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 Required FIFO Basis $600,000 699,600 855,600 864,000 a. Convert the ending FIFO inventory to a LIFO basis for Year 5, Year 6, and Year 7, assuming the dollar-value LIFO method and using the internal price indices.

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 Required FIFO Basis $600,000 699,600 855,600 864,000 a. Convert the ending FIFO inventory to a LIFO basis for Year 5, Year 6, and Year 7, assuming the dollar-value LIFO method and using the internal price indices.

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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Answer ALL of PART B only. Do not Give solution In image format
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. 0 x 69,960 * 0 x 41,750 x 0x 43,200 x
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. 0 x 69,960 * 0 x 41,750 x 0x 43,200 x
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 855,600 Year 7 Ending Inventory 864,000 Required a. Convert the ending FIFO inventory to a LIFO basis for Year 5, Year 6, and Year 7, assuming the dollar-value LIFO method and using the internal price indices. Ending Inventory Price Ending Inventory Date (End of year prices) Index (Base year prices) 600,000 1.00 $ 600,000 $ 699,600✔ 1.10 636,000 ✓ Year 4 $ ✓ Inventory Layers 600,000 600.000 ✓ 36,000✔ Price Index 1.00 S 1.00 1.10 Year 5 Year 6 FIFO Basis $600,000 699,600 Year 7 855,600✔ 1.15 864,000✔ 1.20 744,000 ✓ 720,000 ✓ 600,000 ✓ 36,000 ✓ 108,000 ✓ 1.00 1.10 1.15 600,000 ✓ 1.00 36,000 ✓ 1.10 84,000 ✓ 1.15 0✔ 1.20 S S S Ending Inventory (Dollar Value LIFO) 600,000 ✓ 600,000✔ 39,600 ✓ 639,600 600,000 ✓ 39,600✔ 124,200 ✓ 763,800 600,000✔ 39,600 ✓ 96,600✔ 0✔ 736,200
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. Year Year 4 Ending Inventory Year 5 Ending Inventory Year 6 Ending Inventory 855,600 Year 7 Ending Inventory 864,000 Required a. Convert the ending FIFO inventory to a LIFO basis for Year 5, Year 6, and Year 7, assuming the dollar-value LIFO method and using the internal price indices. Ending Inventory Price Ending Inventory Date (End of year prices) Index (Base year prices) 600,000 1.00 $ 600,000 $ 699,600✔ 1.10 636,000 ✓ Year 4 $ ✓ Inventory Layers 600,000 600.000 ✓ 36,000✔ Price Index 1.00 S 1.00 1.10 Year 5 Year 6 FIFO Basis $600,000 699,600 Year 7 855,600✔ 1.15 864,000✔ 1.20 744,000 ✓ 720,000 ✓ 600,000 ✓ 36,000 ✓ 108,000 ✓ 1.00 1.10 1.15 600,000 ✓ 1.00 36,000 ✓ 1.10 84,000 ✓ 1.15 0✔ 1.20 S S S Ending Inventory (Dollar Value LIFO) 600,000 ✓ 600,000✔ 39,600 ✓ 639,600 600,000 ✓ 39,600✔ 124,200 ✓ 763,800 600,000✔ 39,600 ✓ 96,600✔ 0✔ 736,200
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