Sheridan Company uses the FIFO method for internal reporting purposes and LIFO for external reporting purposes

Accounting Aug 30, 2020

Sheridan Company 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 $327000. The balance in the same account at the end of 2021 is $484000. Sheridan's Cost of Goods Sold account has a balance of $2410000 from sales transactions recorded during the year. What amount should Sheridan report as Cost of Goods Sold in the 2021 income statement?

Expert Solution

Computation of the amount should Sheridan report as Cost of Goods Sold in the 2021 income statement:-

Cost of goods sold in the 2021 income statement = Cost of goods sold account + LIFO reserve at year end - LIFO reserve at beginning

= $2,410,000 + $484,000 - $327,000

= $2,567,000

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