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Morgarella [4.7K]
3 years ago
7

Drew Co. uses the average cost inventory method for internal reporting purposes and LIFO for financial statement and income tax

reporting. At December 31, the inventory was $375,000 using average cost and $320,000 using LIFO. The unadjusted credit balance in the LIFO reserve account on December 31 was $35,000. What adjusting entry should Drew record to adjust from average cost to LIFO at December 31?

Business
1 answer:
Xelga [282]3 years ago
8 0

Answer:

Dr Cost of Goods Sold  20,000

Cr LIFO Reserve           (20,000 )

Explanation:

<u>Journal Entr</u>y    

Dr Cost of Goods Sold  20,000

Cr LIFO Reserve                 (20,000 )

<u>Ending Balances after adjustment</u>:  

 

<u>Stocks</u>:

Inventories        375,000

<u>LIFO Reserve   </u>  <u> (55,000 )</u>

Total:                   320,000   ( Financial Statement and Income Tax compliance )

 

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