The Johnson Corporation reported at the end of the year a LIFO reserve of $45,000.The beginning LIFO reserve was $60,000.The cost of goods sold was $260,000 under LIFO.The cost of goods sold under FIFO should be

Question

Quizplus · Accepted Answer

Under LIFO, the cost of goods sold is lower as it reflects the cost of the most recent inventory purchased, which typically has a higher cost due to inflation. Therefore, to convert from LIFO to FIFO, we need to add back the LIFO reserve to the cost of goods sold.

Beginning LIFO reserve = $60,000
Ending LIFO reserve = $45,000

This means that the cost of goods sold under FIFO was $15,000 higher than under LIFO.

Cost of goods sold under LIFO = $260,000
Cost of goods sold under FIFO = $260,000 + $15,000 = $275,000

Therefore, the correct answer is C) $275,000.

The Johnson Corporation Reported at the End of the Year