Waterway Company began operations on January 1, 2018, and uses the average-cost method of pricing inventory. Management is contemplating a change in inventory methods for 2021. The following information is available for the years 2018–2020. Net Income Computed Using Average-Cost Method FIFO Method LIFO Method 2018 $16,110 $18,880 $12,030 2019 17,960 20,820 13,910 2020 20,000 24,850 17,140 (a) Prepare the journal entry necessary to record a change from the average cost method to the FIFO method in 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit Enter an account title Enter a debit amount Enter a credit amount Enter an account title Enter a debit amount Enter a credit amount (b) Determine net income to be reported for 2018, 2019, and 2020, after giving effect to the change in accounting principle. Net Income 2018 $Enter a dollar amount 2019 $Enter a dollar amount 2020 $Enter a dollar amount (c) Assume Waterway Company used the LIFO method instead of the average cost method during the years 2018–2020. In 2021, Waterway changed to the FIFO method. Prepare the journal entry necessary to record the change in principle. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit Enter an account title Enter a debit amount Enter a credit amount Enter an account title
Waterway Company began operations on January 1, 2018, and uses the average-cost method of pricing inventory. Management is contemplating a change in inventory methods for 2021. The following information is available for the years 2018–2020.
|
Net Income Computed Using |
||||||
|---|---|---|---|---|---|---|
|
Average-Cost Method |
FIFO Method |
LIFO Method |
||||
|
2018 |
$16,110 | $18,880 | $12,030 | |||
|
2019 |
17,960 | 20,820 | 13,910 | |||
|
2020 |
20,000 | 24,850 | 17,140 |
(a) Prepare the
|
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|
|
Enter an account title |
Enter a debit amount |
Enter a credit amount |
|
Enter an account title |
Enter a debit amount |
Enter a credit amount |
(b) Determine net income to be reported for 2018, 2019, and 2020, after giving effect to the change in accounting principle.
|
Net Income |
||
|---|---|---|
|
2018 |
$Enter a dollar amount | |
|
2019 |
$Enter a dollar amount | |
|
2020 |
$Enter a dollar amount |
(c) Assume Waterway Company used the LIFO method instead of the average cost method during the years 2018–2020. In 2021, Waterway changed to the FIFO method. Prepare the journal entry necessary to record the change in principle. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
|
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|
|
Enter an account title |
Enter a debit amount |
Enter a credit amount |
|
Enter an account title |
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