INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
9th Edition
ISBN: 9781260216141
Author: SPICELAND
Publisher: MCG CUSTOM
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Chapter 20, Problem 20.4P
Change in inventory methods
• LO20–2
The Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception of the company in 1979. In 2018, the company decided to change to the average cost method. Data for 2018 are as follows:
Additional Information:
1. The company’s effective income tax rate is 40% for all years.
2. If the company had used the average cost method prior to 2018, ending inventory for 2017 would have been $130,000.
3. 7,000 units remained in inventory at the end of 2018.
Required:
1. Prepare the
2. In the 2018–2016 comparative financial statements, what will be the amounts of cost of goods sold and inventory reported for 2018?
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Exercise 20-1 (Algo) Change in principle; change in inventory methods [LO20-2]
During 2019 (its first year of operations) and 2020, Fieri Foods used the FIFO inventory costing method for both financial report
tax purposes. At the beginning of 2021, Fieri decided to change to the average method for both financial reporting and tax purp
Income components before income tax for 2019, 2020, and 2021 were as follows:
($ in millions)
2019
2020
2021
$ 520 $ 550
(59)
(88)
(306)
Revenues
Cost of goods sold (FIFO)
Cost of goods sold (average)
Operating expenses
$ 510
(51)
(78)
(294)
(53)
(82)
(302)
Dividends of $32 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 accountin
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
adjustment of balance in retained earnings…
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
QUESTION 1
a. Kpogo Ltd has the following products in inventory at the end of 2019:
Units
Cost per unit GH¢
XYZ (completed)
540
22
ABC (part complete)
280
26
Each product normally sells at GH¢34 per unit. Due to the difficult trading conditions, Kpogo Ltd
intends to offer a discount of 15% per unit and expects to incur GH¢4 per unit in selling costs.
GH¢10 per unit is expected to be incurred to complete each unit of ABC.
Required:
In accordance with IAS 2 Inventories, at what amount should inventory be stated in the financial
statements of Kpogo Ltd as at 31 December 2019?
b. According to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors,
an entity must select and apply its accounting policies consistently from one period to the
next and among various items in the financial statements. However, an entity may change
its accounting policies under certain conditions.
Required:
Identify the circumstances under which it may be appropriate to change accounting policy
in…
Chapter 20 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
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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