Prepare the necessary adjusting journal entry

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Reference no: EM132882767

Problem - FIFO Used Internally, LIFO Used Externally - Grimstad Company uses FIFO for internal reporting purposes and LIFO for financial reporting and income tax purposes. At the end of 2019, the following information was obtained from the inventory records:

 

2018

2019

Ending inventory, FIFO

$100,000

$140,000

Ending inventory, FIFO

80,000

115,000

Required -

1. Prepare the necessary adjusting journal entry assuming that Grimstad converts the accounts to LIFO at the end of 2019.

2. Indicate how Grimstad would disclose the inventory value on its comparative balance sheets prepared at the end of 2019.

3. By how much would Grimstad's cost of goods sold differ in 2019 if it used FIFO for external reporting?

Reference no: EM132882767

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