AEP Industries Inc. is a leading manufacturer of plastic packing films. The comp

Question

AEP Industries Inc. is a leading manufacturer of plastic packing films. The company uses the LIFO inventory method for external reporting but maintains its internal records using FIFO. The following disclosure note was included in a recent quarterly report:

4. Inventories (in part)

Inventories are comprised of the following ($ in thousands):

The company’s income statements reported cost of goods sold of $239,826 thousand for the quarter ended January 31, 2016.

Required:

1. Assume that AEP adjusts the LIFO reserve at the end of its quarter. Prepare the January 31, 2016, adjusting entry to record the cost of goods sold adjustment.

2. If AEP had used FIFO to value its inventories, what would cost of goods sold have been for the quarter ended January 31, 2016?

January 31, 2016 October 31, 2015 Raw materials $ 55,883 $ 54,467 Finished goods 105,483 95,363 Supplies 7,065 7,522 168,431 157,352 Less: LIFO reserve (19,220 ) (23,853 ) Inventories (under LIFO) $ 149,211 $ 133,499

Explanation / Answer

Answer a. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 31-Jan LIFO Reserve                                           Dr.          4,633 $23,853 - $19,220    To Cost OF Goods Sold          4,633 (Record the adjusting entry of LIFO Reserve) Answer b. Cost of Goods Sold Under FIFO = $239,826 + $4,633 Cost of Goods Sold Under FIFO = $244,459

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