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Chapter 9: Question E9-30 (page 482)

John Olerud Ltd., a local retailing concern in the Bronx, New York, has decided to change from the conventional retail inventory method to the LIFO retail method starting on January 1, 2018. The company recomputed its ending inventory for 2017 in accordance with the procedures necessary to switch to LIFO retail. The inventory computed was \(212,600. Instructions Assuming that John Olerud Ltd.’s ending inventory for 2017 under the conventional retail inventory method was \)205,000, prepare the appropriate journal entry on January 1, 2018.

Short Answer

Expert verified

In the journal entry, inventory (beginning) will be debited, and adjustment to record inventory at cost will be credited by $7,600, respectively.

Step by step solution

01

Calculation of adjustment

The adjustment amount is calculated as follows:

AdjustmentAmount=InventoryasPerLIFORetail-InventoryasPerConventionalRetail=$212,600-$205,000=$7,600

02

Journal entry

The following journal entry will be recorded:

Date

Description

Debit

Credit

January 1, 2018

Inventory (beginning)

$7,600

Adjustment to record inventory at cost

$7,600

(Being adjusted to record inventory at cost)

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