Question

Sheridan 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 $1,235,600. At December 31, 2020, Sheridan’s internal reports indicated that the FIFO inventory balance was $2,723,000 and for external reporting purposes the LIFO inventory balance was $1,391,200.

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

What is the journal entry needed to record the LIFO effect at December 31, 2020? (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2020	enter an account title for the journal entry on December 31, 2017	enter a debit amount	enter a credit amount
	enter an account title for the journal entry on December 31, 2017	enter a debit amount	enter a credit amount

Answer 1

Lifo reserve on January 1, 2020 = $1,235,600

Fifo inventory cost on December 31, 2020 = $2,723,000

Lifo inventory cost on December 31, 2020 = $1,391,200

Lifo reserve on December 31, 2020 = Fifo inventory cost on December 31, 2020 - Lifo inventory cost on December 31, 2020

= 2,723,000 - 1,391,200

= $1,331,800

Lifo effect for 2020 = Lifo reserve on December 31, 2020 - Lifo reserve on January 1, 2020

= 1,331,800-1,235,600

= $96,200

Journal

Date	Accounts and Explanation	Debit	Credit
December 31, 2020	Cost of goods sold	$96,200
	LIFO Reserve		$96,200

Kindly comment if you need further assistance. Thanks‼!