Chavez Wholesale Inc. changed its method of valuing inventory from the average cost method to the FIFO cost method at the beginning of 20x9. At December 31, 20x8, inventories were $230,000 (average cost basis). They were $238,000 a year earlier. Chavez Wholesale's accountants determined that the inventories would have totaled $286,000 at December 31, 20x8, and $275,000 at December 31, 20x7, if determined on a FIFO basis. A tax rate of 30% is in effect for all years. Pretax income was $1,100,000 in 20x8. Required - (a) Prepare the journal entry to record the change in policy. (b) What is the restated net income for the years ending December 31, 20x8.

Chavez Wholesale Inc. changed its method of valuing inventory from the average cost method to the FIFO cost method at the beginning of 20x9. At December 31, 20x8, inventories were $230,000 (average cost basis). They were $238,000 a year earlier. Chavez Wholesale's accountants determined that the inventories would have totaled $286,000 at December 31, 20x8, and $275,000 at December 31, 20x7, if determined on a FIFO basis. A tax rate of 30% is in effect for all years. Pretax income was $1,100,000 in 20x8. Required - (a) Prepare the journal entry to record the change in policy. (b) What is the restated net income for the years ending December 31, 20x8.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter10: Inventory

Section: Chapter Questions

Problem 2TP: Assume your company uses the periodic inventory costing method, and the inventory count left out an...

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