Change in Inventory Cost Flow AssumptionHeller Company began operations in 2019 and used the LIFO method to compute its $300,000 cost of goods sold for that year. At the beginning of 2020, Heller changed to the FIFO method. Heller determined that its cost of goods sold under FIFO would have been $250,000 in 2019. For 2020, Heller’s cost of goods sold under FIFO was $360,000, while it would have been $410,000 under LIFO. Heller is subject to a 21% income tax rate. Assume Heller Company had sales revenue of $510,000 in 2019 and $650,000 in 2020.Prepare Heller’s partial income statements (through gross profit) for 2019 and 2020.

Question
Asked Dec 2, 2019

Change in Inventory Cost Flow Assumption

Heller Company began operations in 2019 and used the LIFO method to compute its $300,000 cost of goods sold for that year. At the beginning of 2020, Heller changed to the FIFO method. Heller determined that its cost of goods sold under FIFO would have been $250,000 in 2019. For 2020, Heller’s cost of goods sold under FIFO was $360,000, while it would have been $410,000 under LIFO. Heller is subject to a 21% income tax rate. Assume Heller Company had sales revenue of $510,000 in 2019 and $650,000 in 2020.

Prepare Heller’s partial income statements (through gross profit) for 2019 and 2020.
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Income statement: The financial statement which reports revenues and expenses from business operations and the result of tho...

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