Pub. 2 2012 Issue 4

15 Also reverse entries in the fixed asset journal for repairs. Repairs should be expensed as long as they don’t materially add value to a fixed asset, appreciably prolonging an asset’s life, or adapt an asset to a new or different use. What about inventory? Book LIFO adjustment to cost of sales before year end, if possible. If you still have cars and trucks in separate LIFO pools, analyze whether it would be advantageous to combine them into one pool. For inventory that’s not on LIFO – parts, accessories, and perhaps used cars – adjust to the lower of recorded cost or cur- rent wholesale value. Write off obsolete and damaged parts. Donate or scrap write-offs before year end, if they can’t be returned for credit. Perform physical counts of miscellaneous inventory items, such as body shop materials, and adjust them to observed levels. Match work-in-process inventory to the amounts shown on your open repair orders and body shop tickets. If owners or salespeople use demos, review IRS Revenue Pro- cedure 2001-56 to determine the amount taxable to employees. There are a variety of methods you can use for demos, including the simplified full extension, simplified in/out, partial exclusion, Planning and adjusting your balance sheet and income statement accounts before December 31st, you’ll save time and frustration when it’s time to prepare your annual financial statements and income tax returns.  getting the jump — continued on page 16