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 IncomeRetained Earnings (Ending Balance) Under FIFOUnder Average-CostUnder FIFO2015$100,000$  90,000$100,0002016    70,000    65,000  160,0002017    90,000    80,000  235,0002018  120,000  130,000  340,0002019  300,000  290,000  590,0002020  305,000  310,000  780,000Instructionsa.    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?

Question
Asked Jan 24, 2020
14 views

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?

 

check_circle

Expert Answer

Step 1

Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and specify the other subparts (up to 3) you’d like answered.

Step 2

a. Following is the beginning retained earnings balance at January 1, 2017, if G’s prepare comparative financial statements starting in 2017:

Accounting homework question answer, step 2, image 1
fullscreen
Step 3

b. Following is the beginning retained earnings balance at January 1, 2020, if G&...

Accounting homework question answer, step 3, image 1
fullscreen

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Accounting

Other

Related Accounting Q&A

Find answers to questions asked by student like you
Show more Q&A
add
question_answer

Q: Analysis of growth, price-recovery, and productivity components (continuation of 12-19). An analysis...

A: Cost Leadership Strategy: This is a strategy in which a firm distinguishes it by lowering the market...

question_answer

Q: What type of disclosure or accounting do you believe is necessary for the following items? Because ...

A: 1. The increased likelihood of a company depicted to suffer losses due to strike in near future are ...

question_answer

Q: Differentiate between a defined contribution pensionplan and a defined benefit pension plan. Explain...

A: Pension plan: Pension plan is the plan devised by corporations to pay the employees an income after ...

question_answer

Q: What is a stock split?

A: Stock: It refers to a security issued in a form of certificate. It implies the right of ownership of...

question_answer

Q: In an effort to keep up with the rapidly changing global financial markets, the FASB issued standard...

A: Derivatives: Derivatives are some financial instruments which are meant for managing risk and safegu...

question_answer

Q: DRS Corporation changed the way it depreciates its computers from the sum-of-the-year’s-digits metho...

A: 1.Indicate the type of change and how DRS should report the change. 

question_answer

Q: State how each of the following items is reflected in the financial statements. a.    Change from FI...

A: Hi, thankk you for the question. Since we only answer up to 3 sub-parts, we'll answer the first 3. P...

question_answer

Q: Why is it desirable to use a worksheet when preparing a statement of cash flows? Is a worksheet requ...

A: A Cash flow statement is a financial statement that provides the summarised information regarding ca...

question_answer

Q: Describing bonds, journalizing transactions for bonds payable using the straight-line amortization m...

A: 1.If the cash proceeds from issue of bonds are less the face value of bonds, then the bonds is issue...