GEN COMBO LOOSELEAF INTERMEDIATE ACCOUNTING; CONNECT ACCESS CARD
9th Edition
ISBN: 9781260089042
Author: J. David Spiceland
Publisher: McGraw-Hill Education
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Chapter 20, Problem 20.2BE
Change in inventory methods; average cost method to the FIFO method
• LO20–2
In 2018, Adonis Industries changed its method of valuing inventory from the average cost method to the FIFO method. At December 31, 2017, Adonis’s inventories were $47.6 million (average cost). Adonis’s records indicated that the inventories would have totaled $64 million at December 31, 2017, if determined on a FIFO basis. Ignoring income taxes, what
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#25Gelai company had used the FIFO method of inventory valuation since it began operations in 2017. Gelai to change to theweighted average method for determining inventory costs at the beginning of 2017. The following schedule shows year endinventory balances under the FIFO and weighted average method:Year FIFO Weighted Average2017 5,400,000 6,480,0002018 9,360,000 8,520,0002019 9,960,000 9,360,000What amount, before income tax, should be reported in the 2020 statement of retained earnings as the cumulative effect of thechange in accounting policy?
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Exercise 20-2 (Algo) Change in principle; change in inventory methods [LO20-2]
Aquatic Equipment Corporation decided to switch from the LIFO method of costing inventories to the FIFO method at the beginning o
2021. The inventory as reported at the end of 2020 using LIFO would have been $55,000 higher using FIFO. Retained earnings at the
end of 2020 was reported as $730,000 (reflecting the LIFO method). The tax rate is 40%.
Required:
1. Calculate the balance in retained earnings at the time of the change (beginning of 2021) as it would have been reported if FIFO had
been used in prior years.
2. Prepare the journal entry at the beginning of 2021 to record the change in accounting principle.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Calculate the balance in retained earnings at the time of the change (beginning of 2021) as it would have been reported if
FIFO had been used in prior years.
Balance in retained earnings
Required information
P7-6 (Algo) Analyzing and Interpreting the Effects of Inventory Errors LO7-5
[The following information applies to the questions displayed below.]
The income statement for Pruitt Company summarized for a four-year period shows the following:
Sales revenue
Cost of goods sold
Gross profit
Expenses
Pretax income
Income tax expense (30%)
Net income
P7-6 Part 1
2016
2017
$2,041,000 $2,469,000
1,618,000
1,492,000
549,000
484,000
65,000
19,500
$45,500
Sales revenue
Cost of goods sold
Gross profit
Expenses
Pretax income
Income tax expense (30%)
Net income
851,000
496,000
355,000
106,500
$248,500
496,000
334,000
2018
$2,712,000
1,781,000
100,200
233,800
931,000
522,000
409,000
122,700
$286,300
An audit revealed that in determining these amounts, the ending inventory for 2017 was overstated by $21,000. The
company uses a periodic inventory system.
Answer is complete but not entirely correct.
PRUITT COMPANY
Income Statement
For the Four-Year Period
2016
2017
$ 2,041,000…
Chapter 20 Solutions
GEN COMBO LOOSELEAF INTERMEDIATE ACCOUNTING; CONNECT ACCESS CARD
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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- 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…arrow_forwardChapter 8 Perform (ASAC LO 5 and BSAC LO 2) Kingbird Company began operations late in 2024 and adopted the conventional retail inventory method. Because there was no beginning inventory for 2024 and no markdowns during 2024, the ending inventory for 2024 was $13,708 under both the conventional retail method and the LIFO retail method. At the end of 2025, management wants to compare the results of applying the conventional and LIFO retail methods. There was no change in the price level during 2025. The following data are available for computations. Cost Inventory, January 1, 2025 Sales revenue Net markups mu Net markdowns mo Purchases Freight-in Estimated theft (b) The LIFO retail method. Ending inventory at cost Ending inventory at retail Cost $ $13,708 $ 63,900 5,888 Retail Compute the cost of the 2025 ending inventory under both: (a) The conventional retail method. $20,200 77,000 mu 9,900 mD 1,800 ex Beg Ending inventory using the conventional retail method $ 87,500 2,200 27336 40800…arrow_forwardProblem 13On the December 31, 2020 balance sheet of Mann Co., the current receivables consisted ofthe following:Trade accounts receivable 93,000Allowance for uncollectible accounts (2,000)Claim against shipper for goods lost in transit (November 2020) 3,000Selling price of unsold goods sent by Mann on consignment at130% of cost (not included in Mann’s ending inventory) 26,000Security deposit on lease of warehouse used for storing some inventories 30,000Total 150,000On December 31, 2020, the correct total of Mann’s current net receivables was _________. Problem 14The following information relates to Jay Co.’s accounts receivable for 2020:Accounts receivable, 1/1/20 650,000Credit sales for 2020 2,700,000Sales returns for 2020 75,000Accounts written off during 2020 40,000Collections from customers during 2020 2,150,000Estimated future sales returns at 12/31/20 50,000Estimated uncollectible accounts at 12/31/20 110,000What amount should Jay report for accounts receivable, before allowances…arrow_forward
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