Question

Tipton Processing maintains its internal inventory records using average cost under a perpetual inventory system. The following information relates to its inventory during the year: Jan. 1 Inventory on hand-92,000 units; cost $4.00 each. Feb. 14 Purchased 108,000 units for $5.00 each. Mar. 5 Sold 162,000 units for $14.00 each. Aug. 27 Purchased 62,000 units for $6.00 each. Sep. 12 Sold 72,000 units for $14.00 each. Dec. 31 Inventory on hand–28,000 units. Required: 1. Determine the amount Tipton would calculate internally for ending inventory and cost of goods sold using average cost under a perpetual inventory system. 2. Determine the amount Tipton would report externally for ending inventory and cost of goods sold using last-in, first-out (LIFO) under a periodic inventory system. 3. Determine the amount Tipton would report for its LIFO reserve at the end of the year. 4. Record the year-end adjusting entry for the LIFO reserve, assuming the balance at the beginning of the year was $9,200. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Record the year-end adjusting entry for the LIFO reserve, assuming the balance at the beginning of the year was $9,200. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet < 1 > Record the year-end adjusting entry for the LIFO reserve. Note: Enter debits before credits. Transaction General Journal Debit Credit

Answer 1

LIFO RESERVE

LIFO RESERVE = FIFO Inventory - LIFO Inventory

FIFO INVENTORY

28000 * $6 = 168000

LIFO INVENTORY

28000 * $4 = 112000

LIFO RESERVE

168000 - 112000 = 56000

LIFO EFFECT

LIFO EFFECT = LIFO Reserve - Beginning Balance

56000 - 9200 = 46800

JOURNAL ENTRY

On 31st Dec

Cost of goods sold 46800 (Debit)

Allowance to reduce inventory to LIFO 46800 (Credit)