Intermediate Accounting, 10 Ed
Intermediate Accounting, 10 Ed
10th Edition
ISBN: 9781260310177
Author: Mark W. Nelson, Wayne B. Thomas J. David Spiceland
Publisher: McGraw-Hill Education
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Chapter 8, Problem 8.21E

1.

To determine

Concept Introduction:

LIFO reserves: The amount of difference between the FIFO and LIFO cost of inventory for bookkeeping purposes, when conversion takes place from the FIFO to LIFO method is stated as LIFO reserve. Generally, the conversion from FIFO to LIFO takes place at the end of the accounting period. The difference between the internal method and the LIFO method is recorded to a contra account called LIFO reserves.

The adjustment entry to record cost of goods sold adjustment, to adjust LIFO reserves.

2.

To determine

Concept Introduction:

LIFO reserves: The amount of difference between the FIFO and LIFO cost of inventory for bookkeeping purposes, when conversion takes place from the FIFO to LIFO method is stated as LIFO reserve. Generally, the conversion from FIFO to LIFO takes place at the end of the accounting period. The difference between the internal method and the LIFO method is recorded to a contra account called LIFO reserves.

The cost of goods sold for the year ended when the FIFO method is applied to report inventory.

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On January 1, 2024, Maywood Hydraulics leased drilling equipment from Aqua Leasing for a four-year period ending December 31, 2027, at which time possession of the leased asset will revert back to Aqua. • The equipment cost Aqua $423,414 and has an expected economic life of five years. Aqua and Maywood expect the residual value at December 31, 2027, to be $60,000. Negotiations led to Maywood guaranteeing a $85,000 residual value. • Equal payments under the lease are $120,000 and are due on December 31 of each year with the first payment being made on December 31, 2024. Maywood is aware that Aqua used a 7% interest rate when calculating lease payments. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: 1. & 2. Prepare the appropriate entries for Maywood on January 1, 2024 and December 31, 2024, related to the lease. Note: If no entry is required for a transaction/event, select "No journal entry required" in…

Chapter 8 Solutions

Intermediate Accounting, 10 Ed

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