1. Nathan Co. uses FIFO for internal reporting purposes and LIFO for financial a
ID: 2476778 • Letter: 1
Question
1. Nathan Co. uses FIFO for internal reporting purposes and LIFO for financial and tax reporting. The inventory was $600,000 under FIFO and $300,000 under LIFO at December 21, 2014. On that day, the unadjusted credit balance in “LIFO reserve” was 200,000. What adjusting entry should Nathan record to adjust FIFO to LIFO at December 31, 2014?
A) Dr. COGS $150,000
Cr. Inventory $150,000
B) Dr. COGS $300,000
Cr. LIFO Reserve $300,000
C) Dr. COGS $300,000
Cr. Inventory $300,000
D) Dr. COGS $100,000
Cr. LIFO Reserve $100,000
#2.
Dollar Value LIFO uses all of the following to compute ending inventory and Cost of goods sold except:
A. End of year inventory from the general ledger.
B. Layers of Dollar Value LIFO inventory from prior years.
C. Costs of individual items in inventory.
D. Price indexes for each year.
E. Beginning Dollar Value LIFO balance.
Explanation / Answer
Ans 1 Cost as per Fifo 600000 Less Reserve 200000 Adjusted Balance 400000 Cost as per LIFO 300000 Adjustment Required 100000 D. COGS 100000 To LIFO Reserves 100000 Ans 2 Steps of Dollar Value LIFO Determine the value of ending inventory at current cost. Inventory at current cost --> Inventory at base year cost Apply LIFO on the layers of inventory at base year cost. LIFO Inventory at base year cost --> Inventory at added year cost Ans is Beginning Dolla value LIFO Balance
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