Whale Inc. was organized on January 1, 2020. December 31, 2021, the company lost most of itsinventory in a warehouse fire just before the year-end count of inventory was to take place. Thecompany's records disclosed the following data:20202021Inventory, Jan. 1204,000Purchases860,000692,000Purchase returns and allowance46,12064,600Sales788,000836,000Sales returns and allowances16,00020,000On January 1, 2021, Whale's pricing policy was changed so that the gross profit rate would be threepercentage higher than the one earned in 2020Salvaged undamaged merchandise was marked to sell at P24,000 while damaged merchandise markedto sell at P16,000 had an estimated realizable value of P3,600.REQUIRED:a. What is the company's gross profit rate beginning January 1, 2021?b. How much is the inventory fire lost?

a. Gross profit Rate for 2020 as, (Gross profit/ net sales) x 100 Net sales - cost of goods sold…

Answered: 860,000 692,000 ce 46,120 64,600…

Business

Accounting

860,000 692,000 ce 46,120 64,600 788,000 836,000 16,000 20,000

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 6P: Kraft Manufacturing Company manufactures two products: Mult and Tran. At December 31, 2019, Kraft...

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Refer to the information provided in RE8-4. If Paul Corporations inventory at January 1, 2019, had a cost and net realizable value of 300,000, prepare the journal entry to record the reductions to NRV for Paul Corporation assuming that Paul uses a periodic inventory system and the direct method. Paul Corporation uses FIFO and reports the following inventory information: Assuming Paul uses a perpetual inventory system and the direct method, prepare the journal entry to record the write-down of inventory.
Refer to the information provided in RE8-4. If Paul Corporations inventory at January 1, 2019, had a cost and net realizable value of 300,000, prepare the journal entry to record the reductions to NRV for Paul Corporation assuming that Paul uses a periodic inventory system and the allowance method. Paul Corporation uses FIFO and reports the following inventory information: Assuming Paul uses a perpetual inventory system and the direct method, prepare the journal entry to record the write-down of inventory.
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Kraft Manufacturing Company manufactures two products: Mult and Tran. At December 31, 2019, Kraft used the FIFO inventory method. Effective January 1, 2020, Kraft changed to the LIFO inventory method. The cumulative effect of this change is not determinable, and, as a result, the ending inventory of 2019, for which the FIFO method was used, is also the beginning inventory for 2020 for the LIFO method. Any layers added during 2020 should be costed by reference to the first acquisitions of 2020, and any layers liquidated during 2020 should be considered a permanent liquidation. The following information was available from Krafts inventory records for the two most recent years: Required: Compute the effect on income before income taxes for the year ended December 31, 2020, resulting from the change from the FIFO to the LIFO inventory method.
Company Edgar reported the following cost of goods sold but later realized that an error had been made in ending inventory for year 2021. The correct inventory amount for 2021 was 12,000. Once the error is corrected, (a) how much is the restated cost of goods sold for 2021? and (b) how much is the restated cost of goods sold for 2022?
In 2020, Frost Company, which began operations in 2018, decided to change from LIFO to FIFO because management believed that FIFO belter represented the flow of their inventory. Management prepared the following analysis showing the effect of this change: Frost reported net income of 2,500,000, 2,400,000, and 2,100,000 in 2018, 2019, and 2020, respectively. The tax rate is 21%. Required: 1. Prepare the journal entry necessary to record the change. 2. What amount of net income would Frost report in 2018, 2019, and 2020? 3. If Frosts employees received a bonus of 10% of income before deducting the bonus and income taxes in 2018 and 2019, what would be the effect on net income for 2018, 2019, and 2020?
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