|Posted: 20 Sep 2009 at 16:20 | IP Logged
Drew Co. uses the average cost inventory method for internal reporting purposes and LIFO for financial statement and income tax reporting. At December 31, 1992, the inventory was $375,000 using average cost and $320,000 using LIFO. The unadjusted credit balance in the LIFO Reserve account on December 31, 1992, was $35,000. What adjusting entry should Drew record to adjust from average cost to LIFO at December 31, 1992?
a.Cost of Goods Sold$55,000 Inventory$55,000
b.Cost of Goods Sold$55,000 LIFO Reserve$55,000
c.Cost of Goods Sold$20,000 Inventory$20,000
d.Cost of Goods Sold$20,000 LIFO Reserve$20,000
Answer is D
Why is LIFO reserve account getting credited here?