Question

At the end of the annual accounting period, the inventory records of Boton Company show the following. The company uses FIFO for internal purposes and LIFO for income tax and external reporting purposes.

	2020	2021
Ending inventory at FIFO	$120,000	$216,000
Ending inventory at LIFO	48,000	84,000

a. Assume that the inventory difference is recognized in the accounts, and the balance in the allowance account was zero at the beginning of 2020. Provide the necessary journal entry at year-end 2020 and 2021.

Date	Account Name	Dr.	Cr.
Dec. 31, 2020	AnswerCashAccounts ReceivableInventoryAllowance to Reduce FIFO Inventory to LIFO BasisAccounts PayableDeferred RevenueSales RevenueCost of Goods SoldFreight-inPurchasesPurchase DiscountsPurchase Returns and AllowancesInterest ExpenseN/A	Answer	Answer
	AnswerCashAccounts ReceivableInventoryAllowance to Reduce FIFO Inventory to LIFO BasisAccounts PayableDeferred RevenueSales RevenueCost of Goods SoldFreight-inPurchasesPurchase DiscountsPurchase Returns and AllowancesInterest ExpenseN/A	Answer	Answer
Dec. 31, 2021	AnswerCashAccounts ReceivableInventoryAllowance to Reduce FIFO Inventory to LIFO BasisAccounts PayableDeferred RevenueSales RevenueCost of Goods SoldFreight-inPurchasesPurchase DiscountsPurchase Returns and AllowancesInterest ExpenseN/A	Answer	Answer
	AnswerCashAccounts ReceivableInventoryAllowance to Reduce FIFO Inventory to LIFO BasisAccounts PayableDeferred RevenueSales RevenueCost of Goods SoldFreight-inPurchasesPurchase DiscountsPurchase Returns and AllowancesInterest ExpenseN/A	Answer	Answer

b. Show how inventory should be shown on its 2020–2021 comparative balance sheets.

Balance Sheet, Dec 31	2020	2021
Current Assets
Inventory	Answer	Answer

c. If the company reported cost of goods sold of $576,000 in 2021 using LIFO, what would cost of goods sold be using FIFO?

$Answer

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Answer 1