Question

Greene, Inc. uses the LIFO inventory method for external reporting and for income tax purposes but maintains its internal records using FIFO. The following disclosure note was included in a recent annual report:

Inventories ($ in millions):
2021 2020
Total inventories $800 $650
LIFO reserve (86) (65)
The company's income statement reported cost of goods sold of $3,750 million for the fiscal year ended December 31, 2021.
Fill in the blanks below to provide the amount of 2021 ending inventory, cost of goods sold, and inventory turnover if Greene had used FIFO to value its inventories.
Required:
1. Spando adjusts the LIFO reserve at the end of its fiscal year. Prepare the December 31, 2021, adjusting entry to record the cost of goods sold adjustment.
2. If Spando had used FIFO to value its inventories, what would cost of goods sold have been for the 2021 fiscal year?

Answer 1

A. Dr Cost of goods sold$21

Dr LIFO reserve $21

B. $3,729

Step-by-step explanation:

1. Preparation of the December 31, 2021, adjusting entry to record the cost of goods sold adjustment.

December 31, 2021

Dr Cost of goods sold$21

Dr LIFO reserve $21

($86- $65)

2. Calculation to determine what would cost of goods sold have been for the 2021 fiscal year

Cost of goods sold (Income statement)$3,750 million

Less change in LIFO $21

2021 cost of goods $3,729

($3,750-$21)

Therefore what would cost of goods sold have been for the 2021 fiscal year is $3,729