What amount should be reflected as the effect of change in accounting estimate in the statement of changes in equity for 2020?a. 350,000 increaseb. 490,000 decreasec. 490,000 increased. None During 2020, an entity decided to change from FIFO method of inventory valuation tothe weighted average method. Inventory balances under each method were:FIFODecember 31, 2017December 31, 2018December 31, 20194,500,0007,800,0008,300,000Weighted Average5,400,0007,100,0007,800,000The income tax rate is 30%. No other accounting changes was implemented for theyear.

The entity decided to change the inventory valuation method From FIFO to the weighted average the…

Answered: What amount should be reflected as the…

What amount should be reflected as the effect of change in accounting estimate in the statement of changes in equity for 2020? a. 350,000 increase b. 490,000 decrease c. 490,000 increase d. None

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

Chapter7: Inventories: Cost Measurement And Flow Assumptions

Section: Chapter Questions

Problem 11P: Olson Company adopted the dollar-value LIFO method for inventory valuation at the beginning of 2015....

See similar textbooks

Related questions

Q: ABC company's total equity for 2019 amounted to P1,750,000. There was a 5% and a 15% increase in…

A: Total equity for 2020 = Total equity for 2019 + Total equity for 2019 x 5% = 1750000 + 1750000*5% =…

Q: On January 1, 2021, total assets for Liftoff Technologies were $425,000; on December 31, 2021, total…

A: Accounting Equation; Total Assets=Total liabilities + Total Stockholders Equity

Q: The changes in account balances of ENIGMA Co. during 2020 are as follows: Assets: P133,500 increase…

A: Assets: P133,500 increase Liabilities: P40,500 decrease Ordinary share capital: P90,000 increase…

Q: (b) Prepare an income statement for 2020. (Enter negative amounts using either a negative sign…

A: The Financial Statement of a business mainly consists of Income Statement & Balance Sheet.…

Q: C. Complete the statement of changes in equity. MURA MALL, INC. Statement of Changes in Equity For…

A: Statement of changes in equity shows all the addition and deduction made during the year regarding…

Q: The unadjusted net income for the year 2019 is: a. P1,540,200 b. P1,458,200 c. P1,482,200 d.…

A: Net income Net income is the difference between total revenues minus related expenses. Net income…

Q: PROBLEM E ABC company's total equity for 2019 amounted to P1,750,000. There was a 5% and a 15%…

A: Stockholder's Equity - Stockholder's Equity includes the amount contributed by shareholders issued…

Q: The 2020 balance sheet of Dugan, Incorporated, showed current assets of $3,160 and current…

A: Given, The current assets of 2020 are $3160 The current liabilities of 2020 are $1560 The current…

Q: What is the owner's equity for the BlueDragon company for accounting period 2020? note: write the…

A: Solution:- Owner’s equity means the amount of funds contributed by the owners of the entity. In case…

Q: Amount Percentage (a) 2020-2021 $Enter an increase or decrease in dollars. Enter…

A: Net Income: It is profitability of a company after all expenses being made.

Q: Perform a horizontal analysis providing both the amount and percentage change. (Round your…

A: Horizontal analysis is the way to calculate the variance from the different year by year to show an…

Q: By how much did Declan's Designs' Retained Earnings increase during 2022? Please do not provide the…

A: Retained earnings is the accumulated earnings of the business over the period of time. Net income…

Q: What amount should be reflected as the effect of change in accounting estimate in the statement of…

A: For Year 2017, the value of the closing stock increased by 5,400,000-4,500,000=900,000 which means a…

Q: The changes in account balances of ENIGMA Co. during 2020 are as follows: Assets: P133,500 increase…

A: Liabilities: It is the amount the company is liable to payoff in the accounting life of the company.…

Q: Given the ratios for 2020 as follows debtor's collection period=46days stock days on hand=60days…

Q: ABC company's total equity for 2019 amounted to P1,750,000. There was a 5% and a 15% increase in…

A: Total equity for 2020 = Total equity for 2019 + Total equity for 2019 x 5% = 1750000 + 1750000*5% =…

Q: Perform a horizontal analysis on the following information providing both the dollar amount and…

A: Horizontal analysis is prepared to calculate the variance from previous year by showing…

Q: What amount should be reported as income from discontinued operations for 2020? * 5,000,000…

A: Net income refers to the income earned after deducting the company’s expenditures from the company’s…

Q: Total assets amounted to $575,000 for 2018. Total equity amounted to $850,000 for 2019. What is the…

A: Solution: Increase in equity = 850000 - 575000 = $275,000

Q: What is the effect of the errors to the Retained Earnings at the beginning of 2019? * 400,000…

A: Retained earnings are the accumulated earnings of the business, which belongs to the owners and…

Q: What pretax amount should be reported in the 2021 statemen of changes in equity as the cumulative…

A: Calculation of cumulative effect of change in accounting policy Year FIFO Weighted average effect…

Q: Question 4 Wilson Corporation reports a current ratio of 2-to-1 in its 2019 financial statements.…

A: Cash 123,400 Finance Charges 16,600 To Accounts Receivable 140,000…

Q: BLEM ABC company's total equity for 2019 amounted to P1,750,000. There was a 5% and a 15% increase…

A: Given information, Equity for 2019 =P1,750,000 Equity for 2020=5% increase =P1,750,000 + (5% of…

Q: During September 2022, Blossom Diner's total liabilities decreased by $56000 and its stockholders'…

A: Accounting equation represents that the assets are equal to the sum of liabilities and stockholders'…

Q: What amount should be reported as income from discontinued operations for 2020? A. 5,000,000 B.…

A: Income tax is the amount that a business owes to the government for working within the territory of…

Q: Suppose that a company is established in the beginning of the year 2020. As of the 2020 year end,…

A: ANSWER ( A) is the correct option.10% 1. SHAREHOLDERS FUNDS EQUITY MULTIPLIER= TOTAL ASSETS/…

Q: When comparing the statement of financial position of ARB Company for the years 2020 and 2021, it…

A: owners’ equity = Total assets - total liabilities

Q: Revenues and operating (marketing and administrative) expenses for the year 2021 are P7,500,000 and…

A: Explanation Retained Earning is the entire amount of profit of the company has leftover after paying…

Q: ABC company's total equity for 2019 amounted to P1,000,000. There was a 10% and a 20% increase in…

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: tial Ho 50,000.

A: Working Note : A revenue should be recognised for a…

Q: gnoring income tax, the accounting change should preferably be reported by the company in its year…

A: As the question specified ignoring income taxes, the cumulative effect on retained earnings will be…

Q: Ben Merchandise presented the following accounts for 2019 and 2018: P1,238,550.00 (current assets…

A: Non-current assets: These are the assets that are used in the business for more than a year. The…

Q: Based on the given data, what is the returns for Company JFC? Company Dec. 30, 2020 Dec. 29, 2019…

A: Investors have different options to make investments, and the motive behind investments is to…

Q: I did this for hw I just wanted to see if my answers where correct and if not can show me what the…

A: Net working capital (NWC) is the difference in the company’s current assets (CA) and current…

Q: How do I determine the NNO for 2014?

A: Given information is: As on Dec 31, 2014 NOA = $397,299 Equity = $726,328

Q: Questions about the Income Statement. a. List 2 expense accounts AND their amounts for 2020. b.…

A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Q: For how much should retained earnings be retroactively adjusted at January 1, 2019? A. P250,000…

A: Step 1 As in given case, the error of 2017 is already being reflected in 2018, being adjusted…

Q: By how much did Declan's Designs' Retained Earnings decrease during 2022? Please do not provide the…

A: Retained earnings is the accumulated earnings of the business over the period of time. Net income…

Q: Current Attempt in Progress Net income was $490,000 in 2020, $431,200 in 2021, and $513,128 in 2022.…

A: The change in net income is calculated as current year net income less previous year net income.

Q: If total liabilities increased by $70500 during a period of time and stockholders' equity decreased…

A: The accounting equation refers to the equation of the balance sheet. It is based on the method of…

Q: The comparative current liabilities balances for December 31, end of the year, for a company are…

A: Horizontal Analysis - The Statement of Financial Position - The statement of financial position is…

Q: Net income for 2020 was P1,825,600. In 2021, it decreased by 53%. Still using the 2020 net income as…

A: Introduction:- Net income denotes the amount of a profit a company after deduction of all expenses.…

Q: What is the equity amount on December 31, 2018 of Company B? A. C December 31, 2017 Assets P.…

A: Accounting equation says that total assets should always be equals to total liabilities and…

Q: 1,500,000 translation adjustment - credit What amount should be reported as shareholders' equity at…

A: solution concept shareholders equity includes the share capital , share premium and retained…

Q: ABC company's total equity for 2019 amounted to P1,750,000. There was a 5% and a 15% increase in…

A: Net income denotes the profit after charging all the expenses and taxes from the sales. Withdrawals…

Q: Net income was $520,000 in 2020, $442,000 in 2021, and $525,980 in 2022. What is the percentage of…

A: Net income % can be calculated as follows; (Given year's net income -The prior year's net income) /…

Q: 3.Net income for 2020 was P1,825,600. In 2021, it decreased by 53%. Still using the 2020 net income…

A: The term Net income refers to the excess of revenue over the expenses, it increases owners equity.…

Q: Comment on the changes between these two years. What do the changes in ROE mean? What does such a…

A: Return on equity (ROE) is the measure of financial performance, which is calculated by dividing the…

Q: John Landscaping started 2018 with total assets of $23,000 and total liabilities of $13,000. At the…

A: The stockholders equity is the equity capital that is contributed by the equity stockholders as well…

Concept explainers

Stockholder's Equity

The stockholders’ equity (often referred to as the book value of the company) is the number of assets available to the stockholder after its entire liabilities is paid off. The stockholders’ equity is also sometimes referred to as owner's equity. The stockholders’ equity or book value generally includes common stock, treasury stock retained earnings. It is an indicator of a company's financial strength and is an important item on the company's balance sheet.

Question

What amount should be reflected as the effect of change in accounting estimate in the statement of changes in equity for 2020?

a. 350,000 increase

b. 490,000 decrease

c. 490,000 increase

d. None

During 2020, an entity decided to change from FIFO method of inventory valuation to
the weighted average method. Inventory balances under each method were:
FIFO
December 31, 2017
December 31, 2018
December 31, 2019
4,500,000
7,800,000
8,300,000
Weighted Average
5,400,000
7,100,000
7,800,000
The income tax rate is 30%. No other accounting changes was implemented for the
year.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Koopman Company began operations on January 1, 2018, and uses they FIFO inventory method for financial reporting and the average cost inventory method for income taxes. At the beginning of 2020, Koopman decided to switch to the average cost inventory method for financial reporting. It had previously reported the following financial statement information for 2019: An analysis of the accounting records discloses the following cost of goods sold under the FIFO and average cost inventory methods: There are no indirect effects of the change in inventory method. Revenues for 2020 total 130,000; operating expenses for 2020 total 30,000. Koopman is subject to a 21% income tax rate in all years; it pays the income taxes payable of a current year in the first quarter of the next year. Koopman had 10,000 shares of common stock outstanding during all years; it paid dividends of 1 per share in 2020. At the end of 2020, Koopman had cash of 10,000, inventory of 24,000, other assets of 70,800, accounts payable of 4,500, and income taxes payable of 6,000. It desires to show financial statements for the current year and previous year in its 2020 annual report. Required: 1. Prepare the journal entry to reflect the change in methods at the beginning of 2020. Show supporting calculations. 2. Prepare the 2020 financial statements. Notes to the financial statements are not necessary. Show supporting calculations.
Schmidt Company began operations on January 1, 2018, and used the LIFO inventory method for both financial reporting and income taxes. However, at the beginning of 2020, Schmidt decided to switch to the average cost inventory method for financial and income tax reporting. It had previously reported the following financial statement information for 2019: An analysis of the accounting records discloses the following cost of goods sold under the LIFO and average cost inventory methods: There are no indirect effects of the change in inventory method. Revenues for 2020 total 130,000; operating expenses for 2020 total 30,000. Schmidt is subject to a 21% income tax rate in all years; it pays all income taxes payable in the next quarter. Assume that any deferred tax liability was paid in the subsequent year. Schmidt had 10,000 shares of common stock outstanding during all years; it paid dividends of 1 per share in 2020. At the end of 2020, Schmidt had cash of 15,600, inventory of 34,000, other assets of 76,000, income taxes payable of 4,200, and accounts payable of 3,000. It desires to show financial statements for the current year and previous year in its 2020 annual report. Required: 1. Prepare the journal entry to reflect the change in method at the beginning of 2020. Show supporting calculations. 2. Prepare the 2020 financial statements. Notes to the financial statements are not necessary. Show supporting calculations.
Refer to the information provided in RE8-4. If Paul Corporations inventory at January 1, 2019, had a cost and net realizable value of 300,000, prepare the journal entry to record the reductions to NRV for Paul Corporation assuming that Paul uses a periodic inventory system and the allowance method. Paul Corporation uses FIFO and reports the following inventory information: Assuming Paul uses a perpetual inventory system and the direct method, prepare the journal entry to record the write-down of inventory.
Refer to the information provided in RE8-4. If Paul Corporations inventory at January 1, 2019, had a cost and net realizable value of 300,000, prepare the journal entry to record the reductions to NRV for Paul Corporation assuming that Paul uses a periodic inventory system and the direct method. Paul Corporation uses FIFO and reports the following inventory information: Assuming Paul uses a perpetual inventory system and the direct method, prepare the journal entry to record the write-down of inventory.
The following items were included in Venicio Corporations inventory account on December 31, 2019: What amount should Venicio report as inventory at December 31, 2019? a. 21,000 b. 20,400 c. 26,000 d. 35,000
Fava Company began operations in 2018 and used the LIFO inventory method for both financial reporting and income taxes. At the beginning of 2019, the anticipated cost trends in the industry had changed, so that it adopted the FIFO method for both financial reporting and income taxes. Fava reported revenues of 300,000 and 270,000 in 2019 and 2018, respectively. Fava reported expenses (excluding income tax expense) of 125,000 and 120,000 in 2019 and 2018, which included cost of goods sold of 55,000 and 45,000, respectively. An analysis indicates that the FIFO cost of goods sold would have been lower by 8,000 in 2018. The tax rate is 21%. Fava has a simple capital structure with 15,000 shares of common stock outstanding during 2018 and 2019. It paid no dividends in either year. Required: 1. Prepare the journal entry to reflect the change. 2. At the end of 2019, prepare the comparative income statements for 2019 and 2018. Notes to the financial statements are not necessary. 3. At the end of 2019, prepare the comparative retained earnings statements for 2019 and 2018.
At the end of 2019, Manny Company recorded its ending inventory at 350,000 based on a physical count. During 2020, the company discovered that the correct inventory value at the end of 2019 should have been 400,000 because it made a counting error. Upon discovery of this error in 2020, what correcting journal entry will Manny make? Ignore income taxes.
Grimstad Company uses FIFO for internal reporting purposes and LIFO for financial reporting and income tax purposes. At the end of 2019, the following information was obtained from the inventory records: Required: 1. Prepare the necessary adjusting journal entry assuming that Grimstad converts the accounts to LIFO at the end of 2019. 2. Indicate how Grimstad would disclose the inventory value on its comparative balance sheets prepared at the end of 2019. 3. Next Level By how much would Grimstads cost of goods sold differ in 2019 if it used FIFO for external reporting?
Olson Company adopted the dollar-value LIFO method for inventory valuation at the beginning of 2015. The following information about the inventory at the end of each year is available from Olsons records: Required: 1. Calculate the dollar-value LIFO inventory at the end of each year. 2. Prepare the appropriate disclosures for the 2021 annual report if Olson uses current cost internally and LIFO for financial reporting.
Kraft Manufacturing Company manufactures two products: Mult and Tran. At December 31, 2019, Kraft used the FIFO inventory method. Effective January 1, 2020, Kraft changed to the LIFO inventory method. The cumulative effect of this change is not determinable, and, as a result, the ending inventory of 2019, for which the FIFO method was used, is also the beginning inventory for 2020 for the LIFO method. Any layers added during 2020 should be costed by reference to the first acquisitions of 2020, and any layers liquidated during 2020 should be considered a permanent liquidation. The following information was available from Krafts inventory records for the two most recent years: Required: Compute the effect on income before income taxes for the year ended December 31, 2020, resulting from the change from the FIFO to the LIFO inventory method.
Borys Companys periodic inventory at December 31, 2019, is understated by 10,000, but purchases are correct. Johnson correctly values its 2020 ending inventory. What is the effect of this error on Boryss 2019 and 2020 financial statements?
Heller Company began operations in 2019 and used the LIFO method to compute its 300,000 cost of goods sold for that year. At the beginning of 2020, Heller changed to the FIFO method. Heller determined that its cost of goods sold under FIFO would have been 250,000 in 2019. For 2020, Hellers cost of goods sold under FIFO was 360,000, while it would have been 410,000 under LIFO. Heller is subject to a 21% income tax rate. Compute the cumulative effect of the retrospective adjustment on prior years income (net of taxes) that Heller would report on its retained earnings statement for 2020.