Question

Spando Apparel 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): Total inventories LIFO reserve 2021 $ 667 (111) $ 556 2020 $646 (65) $581 The company's income statement reported cost of goods sold of $3,260 million for the fiscal year ended December 31, 2021 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

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Requirement : Spando of end entry its fiscal to record year the adjusts prepare of the the goods lifo deserve at the December 31, 2011 adjusting sold adjustment: cost Date particulars (sin millions) Debit $ 46 Credit Dec 31, 2021 & 46 cost of goods sold ale or To tiro reserve ale (Being additional reserve created during the corrent year) Working: calculation of lito reserve opening Lito reserve (2020) (+) corrent year reserve - closing Li to reserve (2021) 465 $ 46 814 Requirement ③ : It Spanda had used flro cost of goods sold have been to value its inventivies, for the 2021 fiscal year what would millions) (in particulars Amount cost of goods sold (as per income $3260 statement) Less: changes in LIFO (adjusted to 4 (46) cous) cost of goods sold & $3214 (2020)