Question

Black Corporation uses the FIFO method for internal reporting purposes and LIFO for external reporting purposes. The balance in the LIFO Reserve account at the end of 2020 was $280,000. The balance in the same account at the end of 2021 is $420,000. Black’s Cost of Goods Sold account has a balance of $2,100,000 from sales transactions recorded during the year. What amount should Black report as Cost of Goods Sold in the 2021 income statement?

Answer 1

Answer:

Cost of goods sold in the 2021 income statement = $2,240,000

Explanation:

Cost of goods sold in the 2021 income statement = Cost of goods sold account balance from sales trnsaction recorded + ending balance in LIFO Reserve account - Begining balance in LIFO Reserve account

Cost of goods sold in the 2021 income statement = $2,100,000 + $420,000 - $280,000

Cost of goods sold in the 2021 income statement = $2,240,000