Gordon Company started operations on January 1, 2015, and has used the FIFO method of inventory valuation since its inception. In 2021, it decides to switch to the average-cost method. You are provided with the following information. Net Income Retained Earnings (Ending Balance) Under FIFO Under Average-Cost Under FIFO 2015 $100,000 $ 90,000 $100,000 2016 70,000 65,000 160,000 2017 90,000 80,000 235,000 2018 120,000 130,000 340,000 2019 300,000 290,000 590,000 2020 305,000 310,000 780,000 Instructions a. What is the beginning retained earnings balance at January 1, 2017, if Gordon prepares comparative financial statements starting in 2017? b. What is the beginning retained earnings balance at January 1, 2020, if Gordon prepares comparative financial statements starting in 2020? c. What is the beginning retained earnings balance at January 1, 2021, if Gordon prepares single-period financial statements for 2021? d. What is the net income reported by Gordon in the 2020 income statement if it prepares comparative financial statements starting with 2018?
Gordon Company started operations on January 1, 2015, and has used the FIFO method of inventory valuation since its inception. In 2021, it decides to switch to the average-cost method. You are provided with the following information.
|
|
Net Income
|
Retained Earnings (Ending Balance)
|
|
|
|
Under FIFO
|
Under Average-Cost
|
Under FIFO
|
|
2015
|
$100,000
|
$ 90,000
|
$100,000
|
|
2016
|
70,000
|
65,000
|
160,000
|
|
2017
|
90,000
|
80,000
|
235,000
|
|
2018
|
120,000
|
130,000
|
340,000
|
|
2019
|
300,000
|
290,000
|
590,000
|
|
2020
|
305,000
|
310,000
|
780,000
|
Instructions
a. What is the beginning retained earnings balance at January 1, 2017, if Gordon prepares comparative financial statements starting in 2017?
b. What is the beginning retained earnings balance at January 1, 2020, if Gordon prepares comparative financial statements starting in 2020?
c. What is the beginning retained earnings balance at January 1, 2021, if Gordon prepares single-period financial statements for 2021?
d. What is the net income reported by Gordon in the 2020 income statement if it prepares comparative financial statements starting with 2018?
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