In 2020, Frost Company, which began operations in 2018, decided to change from LIFO to FIFO because management believed that FIFO better represented the flow of their inventory. Management prepared the following analysis showing the effect of this change: Ending Inventory LIFO FIFO Cumulative Difference 12/31/2018 $240,500 $275,300 $34,800 12/31/2019 246,400 306,200 59,800 12/31/2020 254,400 326,200 71,800 Frost reported net income of $2,584,500, $2,313,500, and $2,033,500 in 2018, 2019, and 2020, respectively. The tax rate is 35%. 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?
In 2020, Frost Company, which began operations in 2018, decided to change from LIFO to FIFO because management believed that FIFO better represented the flow of their inventory. Management prepared the following analysis showing the effect of this change: Ending Inventory LIFO FIFO Cumulative Difference 12/31/2018 $240,500 $275,300 $34,800 12/31/2019 246,400 306,200 59,800 12/31/2020 254,400 326,200 71,800 Frost reported net income of $2,584,500, $2,313,500, and $2,033,500 in 2018, 2019, and 2020, respectively. The tax rate is 35%. 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?
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 8E: In 2020, Frost Company, which began operations in 2018, decided to change from LIFO to FIFO because...
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In 2020, Frost Company, which began operations in 2018, decided to change from LIFO to FIFO because management believed that FIFO better represented the flow of their inventory. Management prepared the following analysis showing the effect of this change:
|
Ending Inventory
|
LIFO
|
FIFO
|
Cumulative Difference
|
| 12/31/2018 | $240,500 | $275,300 | $34,800 |
| 12/31/2019 | 246,400 | 306,200 | 59,800 |
| 12/31/2020 | 254,400 | 326,200 | 71,800 |
Frost reported net income of $2,584,500, $2,313,500, and $2,033,500 in 2018, 2019, and 2020, respectively. The tax rate is 35%.
Required:
| 1. | Prepare the |
| 2. | What amount of net income would Frost report in 2018, 2019, and 2020? |
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