Question

Problem 2: m erson Company uses the FIFO method for internal reporting purposes and LIFO for external reports purposes. The balance in the LIFO Reserve account at the end of 2016 was $120,000. The balance in the same account at the end of 2017 is $180,000. Anderson's Cost of Goods Sold account has a balance of $900,000 from ales transactions recorded during the year. What amount should Anderson report as Cost of Goods Sold in the 017 income statement?

Answer 1

Solution:

Cost of goods sold in the 2017 income statement =$960,000.

Explanation:

Cost of goods sold in the 2017 income statement = Cost of goods sold account balance from sales transaction recorded + ending balance in Lifo Reserve account - beginning balance in Lifo Reserve account

Cost of goods sold in the 2017 income statement = $900,000 + $180,000 - $120,000

= $1,080,000 - $120,000

=$960,000