LIFO reserves: When a company maintains internal records throughout reporting period using FIFO or average cost but uses LIFO for external reporting due to various reasons, the difference between the internal method and LIFO is entered into records as a contra account to inventory. This contra account is called a LIFO reserve. The year-end entry adjusts LIFO reserves.

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Chapter 8, Problem 8.11BE

To determine

Concept Introduction:

LIFO reserves: When a company maintains internal records throughout reporting period using FIFO or average cost but uses LIFO for external reporting due to various reasons, the difference between the internal method and LIFO is entered into records as a contra account to inventory. This contra account is called a LIFO reserve.

The year-end entry adjusts LIFO reserves.

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