Question

Vaughn Company uses the LIFO method for financial reporting purposes but FIFO for internal reporting purposes. At January 1, 2017, the LIFO reserve has a credit balance of $1,103,100. At December 31, 2017, Vaughn’s internal reports indicated that the FIFO inventory balance was $2,661,200 and for external reporting purposes the LIFO inventory balance was $1,461,800.

What is the amount of the LIFO reserve and the LIFO effect related to 2017?

LIFO reserve at December 31, 2017		$
LIFO effect for 2017		$

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What is the journal entry needed to record the LIFO effect at December 31, 2017? (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, 2017

Answer 1

a) Amount of LIFO reserve and LIFO effect related to 2017:

Particulars	Amount
Internal reporting inventory	$2,661,200
Less: External reporting inventory	$1,461,800
external reporting (LIFO credit reserve)	$1,199,400
Less: Beginning LIFO credit reserve	$1,103,100
LIFO effect	$96,300

b) Journal entry:

date	Particulars	Debit	Credit
Dec 31,2017	Cost of goods sold	$96,300
	LIFO reserve		$96,300
	(Being to LIFO effect recorded)

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