A Company Begins the Year with a Zero Balance in the LIFO

question 5

Multiple Choice

A company begins the year with a zero balance in the LIFO Reserve account. Based on an analysis of LIFO and FIFO, the company determines the LIFO Reserve should be $20,000 at the end of the year? Which journal entry is needed?

• A) Debit Cost of Goods Sold for $20,000 and Credit LIFO Reserve for $20,000.
• B) Debit LIFO Reserve for $20,000 and Credit Cost of Goods Sold for $20,000.
• C) Debit Cost of Goods Sold for $20,000 and Credit Inventory for $20,000.
• D) Debit Inventory for $20,000 and Credit Gain on Inventory for $20,000.

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Definitions:

[H]

Often represents a hydrogen atom in chemical notation, particularly in the context of organic chemistry and reduction reactions.

Baking Soda

A white crystalline compound (sodium bicarbonate, NaHCO3) used in baking as a leavening agent and in various cleaning applications.

Baking Powder

A leavening agent that contains typically a combination of sodium bicarbonate and an acid, used in baking to produce carbon dioxide and raise dough.

Leavening Effect

The leavening effect is the process of causing dough or batter to rise by producing gas bubbles, typically through yeast fermentation or chemical leaveners.