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Assume prices were stable during the period. The following values were obtained from the inventory records of Harris Company which has a fiscal year ending on December 31: Inventory, January 1, 2019, LIFO $80,000 Inventory, March 31, 2019, LIFO 70,000     Required: 1. Under what conditions is Harris’s inventory liquidation not reflected in its first-quarter interim financial statements? 2. Assuming that the liquidation is not to be reflected, what adjusting entry would Harris make?

Question
Assume prices were stable during the period. The following values were obtained from the inventory records of Harris Company which has a fiscal year ending on December 31:
Inventory, January 1, 2019, LIFO $80,000
Inventory, March 31, 2019, LIFO 70,000
 
  Required:
1. Under what conditions is Harris’s inventory liquidation not reflected in its first-quarter interim financial statements?
2. Assuming that the liquidation is not to be reflected, what adjusting entry would Harris make?
CHART OF ACCOUNTS
Harris Company
General Ledger
ASSETS
REVENUE
111 Cash
411 Sales Revenue
121 Accounts Receivable
131 Inventory
EXPENSES
142 Prepaid Insurance
500 Cost of Goods Sold
181 Equipment
521 Salaries Expense
198 Accumulated Depreciation
525 Interest Expense
532 Bad debt Expense
LIABILITIES
534 Insurance Expense
211 Accounts Payable
535 Supplies Expense
231 Salaries Payable
536 Utilities Expense
251 Unearned Revenue
541 Depreciation Expense
261 Income Taxes Payable
559 Miscellaneous Expenses
910 Income Tax Expense
EQUITY
311 Common Stock
331 Retained Earnings
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Transcribed Image Text:CHART OF ACCOUNTS Harris Company General Ledger ASSETS REVENUE 111 Cash 411 Sales Revenue 121 Accounts Receivable 131 Inventory EXPENSES 142 Prepaid Insurance 500 Cost of Goods Sold 181 Equipment 521 Salaries Expense 198 Accumulated Depreciation 525 Interest Expense 532 Bad debt Expense LIABILITIES 534 Insurance Expense 211 Accounts Payable 535 Supplies Expense 231 Salaries Payable 536 Utilities Expense 251 Unearned Revenue 541 Depreciation Expense 261 Income Taxes Payable 559 Miscellaneous Expenses 910 Income Tax Expense EQUITY 311 Common Stock 331 Retained Earnings
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