Computing and Recording Ending Inventory using Dollar-Value LIFOOn January 1, 2020, Crow Company changed from FIFO to LIFO for income tax and external reporting purposes. On that same date, the beginning FIFO inventory (the base inventory for LIFO purposes) was$95,000. The following information is available from Crow's records for years 2020 through 2023.Ending Inventory Ending Inventoryon a FIFO Basis at Base Year CostsYear2020$125,000$113,6002021110,00084,6002022115,00085,2002023130,00092,900a. Compute the price indices used to calculate ending inventory at base year costs. Hint: Divide ending inventory on a FIFO basis by ending inventory at base year for each year.Note: Enter each price index rounded to two digits after the decimal; for example, enter an index of 1.42 for 1.424 or enter an index of 1.43 for 1.425.PriceYearIndex201920201.11 v20211.3 V20221.35 V20231.4 vb. Compute the ending inventory on a dollar-value LIFO basis for each year, 2020 through 2023.• In step four (restating layers of inventory into current year dollars) use rounded indices from part a.• Round final answers to the nearest whole dollar.Dollar-value LIFO ending inventory, 2020$Dollar-value LIFO ending inventory, 2021$Dollar-value LIFO ending inventory, 2022$0 x0 xDollar-value LIFO ending inventory, 2023 $0 x c. Prepare the journal entry at each year-end, 2020 through 2023, to adjust inventory to LIFO.DateAccount NameDr.Cr.Dec. 31, 2020 Cost of Goods SoldAllowance to Reduce FIFO Inventory to LIFO Basis +0 xDec. 31, 2021 Cost of Goods SoldAllowance to Reduce FIFO Inventory to LIFO Basis + v0 xDec. 31, 2022 Cost of Goods SoldAllowance to Reduce FIFO Inventory to LIFO Basis +Dec. 31, 2023 Cost of Goods SoldAllowance to Reduce FIFO Inventory to LIFO Basis + v0 x

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ivide ending inventory on a FIFO basis by ending im index of 1.42 for 1.424 or enter an index of 1.43 fo

FINANCIAL ACCOUNTING

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ISBN:9781259964947

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Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Question

Computing and Recording Ending Inventory using Dollar-Value LIFO
On January 1, 2020, Crow Company changed from FIFO to LIFO for income tax and external reporting purposes. On that same date, the beginning FIFO inventory (the base inventory for LIFO purposes) was
$95,000. The following information is available from Crow's records for years 2020 through 2023.
Ending Inventory Ending Inventory
on a FIFO Basis at Base Year Costs
Year
2020
$125,000
$113,600
2021
110,000
84,600
2022
115,000
85,200
2023
130,000
92,900
a. Compute the price indices used to calculate ending inventory at base year costs. Hint: Divide ending inventory on a FIFO basis by ending inventory at base year for each year.
Note: Enter each price index rounded to two digits after the decimal; for example, enter an index of 1.42 for 1.424 or enter an index of 1.43 for 1.425.
Price
Year
Index
2019
2020
1.11 v
2021
1.3 V
2022
1.35 V
2023
1.4 v
b. Compute the ending inventory on a dollar-value LIFO basis for each year, 2020 through 2023.
• In step four (restating layers of inventory into current year dollars) use rounded indices from part a.
• Round final answers to the nearest whole dollar.
Dollar-value LIFO ending inventory, 2020$
Dollar-value LIFO ending inventory, 2021$
Dollar-value LIFO ending inventory, 2022$
0 x
0 x
Dollar-value LIFO ending inventory, 2023 $
0 x

c. Prepare the journal entry at each year-end, 2020 through 2023, to adjust inventory to LIFO.
Date
Account Name
Dr.
Cr.
Dec. 31, 2020 Cost of Goods Sold
Allowance to Reduce FIFO Inventory to LIFO Basis +
0 x
Dec. 31, 2021 Cost of Goods Sold
Allowance to Reduce FIFO Inventory to LIFO Basis + v
0 x
Dec. 31, 2022 Cost of Goods Sold
Allowance to Reduce FIFO Inventory to LIFO Basis +
Dec. 31, 2023 Cost of Goods Sold
Allowance to Reduce FIFO Inventory to LIFO Basis + v
0 x

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