INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
9th Edition
ISBN: 9781260216141
Author: SPICELAND
Publisher: MCG CUSTOM
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Chapter 20, Problem 20.5P
Change in inventory methods
• LO20–2
Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2018 decided to change to the FIFO method. The inventory as reported at the end of 2017 using LIFO would have been $20 million higher using FIFO.
Required:
1. Prepare the
2. In the 2018–2017 comparative income statements, what will be the amounts of net income reported for 2017 and 2018?
3. Prepare the 2018–2017 retained earnings column of the comparative statements of shareholders’ equity.
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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
Problem 2
CPA Co. had used the FIFO method of inventory valuation since it began operations in 2017. CPA Co.
decided to change to the weighted average method for determining inventory costs at the beginning of
2019. The following schedule shows year-end inventory balances under FIFO and weighted average
method.
Weighted Average
5,400,000
7,100,000
7,800,000
Year
2017
FIFO
2018
2019
4,500,000
7,800,000
8,300,000
Assuming the income tax rate is 30%, what amount should be reported in the 2020 Statement of
Changes in Equity as the cumulative effect of this accounting change? Indicate whether debit or credit.
С23
Jx
А
B
C.
D
E
F
G
H.
K
I also need your assistance in claulating the following economic order quantity (Qe) given new data for 2017.
Our inventory generally follows Pareto's Law; therefore, I have emphasized controlling those items representing the majority of our inventory activity.
One of those items in IV (intravenous) setups.
Our current situation is as follows:
2016 Price
$50 for each IV setup
50,000
$25
2017 Demand
2017 Operating Cost
2017 Interest
6.25%
2017 Holding Cost
$0.50
The IV distributor would like to distribute a new model setup in 2017 at the same price, but he tells us that he is willing to reduce our carrying costs by making monthly deliveries.
After discussing this proposal with Ms. Care, I discovered that training will be required for the new setup.
Ms. Care believes, and the distributor agrees, that each registered nurse (RN) will be required to attend a 2 hour seminar.
I'm not sure where we put this training cost in the total cost formula.
Ms. Care tells me…
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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