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At the end of 2020, the Fox Co. reported the following information: o Ending Inventory $154,000 (based on FIFO used since inc

1) Debit retained earnings $30,000. O2) Credit retained earnings $30,000. 3) Debit inventory $30,000. 4) Credit inventory $30
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Answer #1

Answer 1) Debit retained earning $30,000

Since Inventory Balance under FIFO method is more in 2020 as compare to Inventory balance under LIFO. Hence if LIFO method would have been used,company would have consumed extra inventory of $30,000 which would be part of COGS, So there will be a increase in the expenses. For that, Retained earning will be reduced (Debited) by $30,000 in 2021 as a adjustment entry.

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