Question

Sheffield Company uses the LIFO method for financial reporting purposes but FIFO for internal reporting purposes. At January 1, 2020, the LIFO reserve has a credit balance of $1,067,300. At December 31, 2020, Sheffield’s internal reports indicated that the FIFO inventory balance was $2,688,300 and for external reporting purposes the LIFO inventory balance was $1,525,000. (a) What is the amount of the LIFO reserve and the LIFO effect related to 2020? LIFO reserve at December 31, 2020 $enter a dollar amount LIFO effect for 2020 $enter a dollar amount

Answer 1

Answer and Explanation:

The computation of the amount of the LIFO reserve and the LIFO effect related to 2020 is shown below:

Internal reporting inventory $2,688,300

Less: External reporting inventory $1,525,000

LIFO reserve at December 31 2020 $1,163,300

Less: Beginning LIFO credit reserve $1,067,300

LIFO effect for 2020 $96,000