INTERMEDIATE ACCOUNTING(LL)-W/2 ACCESS
9th Edition
ISBN: 9781260180657
Author: SPICELAND
Publisher: MCG
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Chapter 20, Problem 20.1BYP
Integrating Case 20–1
Change to dollar-value LIFO
• LO20–3
Webster Products, Inc., adopted the dollar-value LIFO method of determining inventory costs for financial and income tax reporting on January 1, 2018. Webster continues to use the FIFO method for internal decision-making purposes. Webster’s FIFO inventories at December 31, 2018, 2019, and 2020, were $300,000, $412,500, and $585,000, respectively. Internally generated cost indexes are used to convert FIFO inventory amounts to dollar-value LIFO amounts. Webster estimated these indexes as follows:
| 2018 | 1.00 |
| 2019 | 1.25 |
| 2020 | 1.50 |
Required:
- 1. Determine Webster’s dollar-value LIFO inventory at December 31, 2019 and 2020.
- 2. Describe how the change should have been reported in Webster’s 2018 financial statements.
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Exercise 20-1 (Algo) Change in principle; change in inventory methods [LO20-2]
During 2019 (its first year of operations) and 2020, Fieri Foods used the FIFO inventory costing method for both financial reporting and
tax purposes. At the beginning of 2021, Fieri decided to change to the average method for both financial reporting and tax purposes.
Income components before income tax for 2019, 2020, and 2021 were as follows:
($ in millions)
Revenues
Cost of goods sold (FIFO)
Cost of goods sold (average)
Operating expenses
2019 2020
2021
$50
$ 460 $47
(46)
(68)
(274) (282) (286)
(54)
(48)
(72) (78)
Dividends of $27 million were paid each year. Fieri's fiscal year ends December 31.
Required:
1. Prepare the journal entry at the beginning of 2021 to record the change in accounting principle. (Ignore income taxes.)
2. Prepare the 2021-2020 comparative income statements.
3. & 4. Determine the balance in retained earnings at January 1, 2020 as Fieri reported using FIFO method and determine the…
Exercise 8-26 (Algo) Dollar-value LIFO [LO8-8]
On January 1, 2024, a Company adopted the dollar-value LIFO method for its one inventory pool. The pool's value on this date was
$670,000. The 2024 and 2025 ending inventory valued at year-end costs were $714,000 and $795,000, respectively. The appropriate
cost indexes are 1.05 for 2024 and 1.06 for 2025.
Required:
Complete the below table to calculate the inventory value at the end of 2024 and 2025 using the dollar-value LIFO method.
Note: Round "Year end cost index" to 2 decimal places. Round other final answer values to the nearest whole dollars.
Date
01/01/2024
12/31/2024
12/31/2025
Inventory Layers Converted to Base Year Cost
Inventory at
Year-End
Cost
Year-End
Cost
Index
=
=
=
Inventory
Layers at
Base Year
Cost
Base
Base
2024
Base
2024
2025
Inventory Layers Converted to Cost
Inventory
Layers at Base
Year Cost
Year-End
Cost Index
=
=
=
=
=
Inventory
Layers
Converted to
Cost
Inventory
DVL Cost
S
S
S
0
0
0
PROBLEM 15
Examination of the records of Hopper Company for the year ended December 31, 2021 revealed the following:
• Inventory at January 1, 2021 was overstated by P71,000.
• Inventory at December 31, 2021 was understated by P96,000.
•
During 2021, Hopper received a P60,000 cash advance from a customer for merchandise to be manufactured
and shipped during 2022. The P60,000 was credited to sales revenue.
• Profit (before adjustments) reported on the 2021 profit or loss was P658,000.
Explain the right profit for 2021
Chapter 20 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/2 ACCESS
Ch. 20 - Prob. 20.1QCh. 20 - There are three basic accounting approaches to...Ch. 20 - Prob. 20.3QCh. 20 - Lynch Corporation changes from the...Ch. 20 - Sugarbaker Designs Inc. changed from the FIFO...Ch. 20 - Most changes in accounting principles are recorded...Ch. 20 - Southeast Steel, Inc., changed from the FIFO...Ch. 20 - Prob. 20.8QCh. 20 - Its not easy sometimes to distinguish between a...Ch. 20 - For financial reporting, a reporting entity can be...
Ch. 20 - Prob. 20.11QCh. 20 - Describe the process of correcting an error when...Ch. 20 - Prob. 20.13QCh. 20 - If it is discovered that an extraordinary repair...Ch. 20 - Prob. 20.15QCh. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in inventory methods; average cost method...Ch. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in depreciation methods LO203 Irwin, Inc.,...Ch. 20 - Prob. 20.5BECh. 20 - Book royalties LO204 Three programmers at Feenix...Ch. 20 - Warranty expense LO204 In 2017, Quapau Products...Ch. 20 - Change in estimate; useful life of patent LO204...Ch. 20 - Prob. 20.9BECh. 20 - Error correction LO206 In 2018, internal auditors...Ch. 20 - Prob. 20.11BECh. 20 - Error correction LO206 In 2018, the internal...Ch. 20 - Change in principle; change in inventory methods ...Ch. 20 - Change in principle; change in inventory methods ...Ch. 20 - Change from the treasury stock method to retired...Ch. 20 - Change in principle; change to the equity method ...Ch. 20 - Prob. 20.5ECh. 20 - FASB codification research LO202 Access the FASB...Ch. 20 - Change in principle; change in inventory cost...Ch. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in inventory methods; FIFO method to the...Ch. 20 - Change in depreciation methods LO203 For...Ch. 20 - Change in depreciation methods LO203 The Canliss...Ch. 20 - Book royalties LO204 Dreighton Engineering Group...Ch. 20 - Loss contingency LO204 The Commonwealth of...Ch. 20 - Warranty expense LO204 Woodmier Lawn Products...Ch. 20 - Prob. 20.15ECh. 20 - Accounting change LO204 The Peridot Company...Ch. 20 - Change in estimate; useful life and residual value...Ch. 20 - Classifying accounting changes LO201 through...Ch. 20 - Error correction; inventory error LO206 During...Ch. 20 - Error corrections; investment LO206 Required: 1....Ch. 20 - Prob. 20.21ECh. 20 - Prob. 20.22ECh. 20 - Prob. 20.23ECh. 20 - Inventory errors LO206 Indicate with the...Ch. 20 - Classifying accounting changes and errors LO201...Ch. 20 - Change in inventory costing methods; comparative...Ch. 20 - P 20-2 Change in principle; change in method of...Ch. 20 - Change in inventory costing methods; comparative...Ch. 20 - Change in inventory methods LO202 The Rockwell...Ch. 20 - Change in inventory methods LO202 Fantasy...Ch. 20 - Change in principle; change in depreciation...Ch. 20 - Depletion; change in estimate LO204 In 2018, the...Ch. 20 - Accounting changes; six situations LO201, LO203,...Ch. 20 - Prob. 20.9PCh. 20 - Inventory errors LO206 You have been hired as the...Ch. 20 - Error correction; change in depreciation method ...Ch. 20 - Accounting changes and error correction; seven...Ch. 20 - Prob. 20.13PCh. 20 - Prob. 20.14PCh. 20 - Prob. 20.15PCh. 20 - Prob. 20.16PCh. 20 - Prob. 20.17PCh. 20 - Integrating Case 201 Change to dollar-value LIFO ...Ch. 20 - Prob. 20.2BYPCh. 20 - Prob. 20.3BYPCh. 20 - Analysis Case 204 Change in inventory methods;...Ch. 20 - Prob. 20.5BYPCh. 20 - Prob. 20.6BYPCh. 20 - Analysis Case 208 Various changes LO201 through...Ch. 20 - Analysis Case 209 Various changes LO201 through...Ch. 20 - Prob. 20.10BYPCh. 20 - Prob. 20.11BYPCh. 20 - Prob. 20.12BYPCh. 20 - Prob. 1CCTC
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