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 2010 was $60,000.The balance in the same account at the end of 2011 is $90,000.Black's Cost of Goods Sold account has a balance of $450,000 from sales transactions recorded during the year.What amount should Black report as Cost of Goods Sold in the 2011 income statement?

Question

Quizplus · Accepted Answer

The LIFO Reserve increased by $30,000 ($90,000 - $60,000), meaning that the cost of ending inventory under LIFO must have increased by $30,000. This means that the cost of goods sold under LIFO was $30,000 higher than it would have been under FIFO. Therefore, the cost of goods sold under FIFO would be $420,000 ($450,000 - $30,000).

Black Corporation Uses the FIFO Method for Internal Reporting Purposes