Intermediate Accounting, Student Value Edition (2nd Edition)
2nd Edition
ISBN: 9780134732145
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Question
Chapter 21, Problem 21.2P
a.
To determine
J&S Arnez’s net income.
b.
To determine
The cumulative effect on retained earnings from the change in accounting method from weighted average to FIFO.
c.
To determine
To prepare: Comparative income statement of J&S under FIFO method.
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FTC Company had used the FIFO method of inventory valuation since it began operations in 2016. The entity decided to
change to the weighted average method for measuring inventory at the beginning of 2019. The income tax rate is 30%.
The following schedule shows year-end inventory balances:
Year FIFO
Weighted Average
2016
P4,500,000
P5,400,000
2017
7,800,000
7,100,000
2018
8,300,000
7,800,000
What amount should be reported for 2019 as the cumulative effect of the change in accounting policy?
(A P500,000 decrease in retained earnings
B P350,000 increase in retained earnings
(C P350,000 decrease in retained earnings
D P500,000 increase in retained earnings
Swifty Company began operations on January 1, 2023, and uses the average-cost method of pricing inventory. Management is
contemplating a change in inventory methods for 2026. The following information is available for the years 2023-2025.
2023
2024
2025
(Ignore all tax effects.)
(a)
Net Income Computed Using
FIFO Method
$19,170
20.980
25.060
Average-Cost Method
$15.900
17,880
20,180
LIFO Method
$12.110
Account Titles and Explanation
13.990
17,120
Prepare the journal entry necessary to record a change from the average-cost method to the FIFO method in 2026. (Credit account
titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the
account titles and enter O for the amounts. List debit entry before credit entry.)
Debit
Credit
Holder-Webb Company began operations on January 1, 2018, and uses the average-cost method of pricing inventory. Management is contemplating a change in inventory methods for 2021. The following information is available for the years 2018–2020.
Net Income Computed Using
Average-Cost Method
FIFO Method
LIFO Method
2018
$15,000
$19,000
$12,000
2019
18,000
23,000
14,000
2020
20,000
25,000
17,000
Instructions
(Ignore all tax effects.)
a. Prepare the journal entry necessary to record a change from the average-cost method to the FIFO method in 2021.
b. Determine net income to be reported for 2018, 2019, and 2020, after giving effect to the change in accounting principle.
c. Assume Holder-Webb Company used the LIFO method instead of the average-cost method during the years 2018–2020. In 2021, Holder-Webb changed to the FIFO method. Prepare the journal entry necessary to record the change in principle.
Chapter 21 Solutions
Intermediate Accounting, Student Value Edition (2nd Edition)
Ch. 21 - Are accounting changes permitted in financial...Ch. 21 - How do firms report accounting changes under the...Ch. 21 - Prob. 21.3QCh. 21 - How do firms account for changes in accounting...Ch. 21 - Prob. 21.5QCh. 21 - Prob. 21.6QCh. 21 - Prob. 21.7QCh. 21 - Prob. 21.8QCh. 21 - Do accounting errors that self-correct within two...Ch. 21 - Does a firm need to correct an error that...
Ch. 21 - Prob. 21.1MCCh. 21 - Prob. 21.2MCCh. 21 - Prob. 21.3MCCh. 21 - Prob. 21.4MCCh. 21 - Prob. 21.5MCCh. 21 - Prob. 21.1BECh. 21 - Prob. 21.2BECh. 21 - Prob. 21.3BECh. 21 - Prob. 21.4BECh. 21 - Change in Accounting Principle, Long-Term...Ch. 21 - Prob. 21.6BECh. 21 - Prob. 21.7BECh. 21 - Prob. 21.8BECh. 21 - Prob. 21.9BECh. 21 - Prob. 21.10BECh. 21 - Prob. 21.11BECh. 21 - Prob. 21.12BECh. 21 - Prob. 21.13BECh. 21 - Prob. 21.14BECh. 21 - Change in Accounting Principle, Inventory. Massi...Ch. 21 - Change in Accounting Principle, Long-Term...Ch. 21 - Prob. 21.3ECh. 21 - Change in Accounting Principle, Inventory. Winthur...Ch. 21 - Prob. 21.5ECh. 21 - Prob. 21.6ECh. 21 - Error Analysis and Correction. Feinstein and...Ch. 21 - Prob. 21.8ECh. 21 - Prob. 21.9ECh. 21 - Prob. 21.10ECh. 21 - Change in Accounting Principle, Inventory. Second...Ch. 21 - Prob. 21.2PCh. 21 - Prob. 21.3PCh. 21 - Prob. 21.4PCh. 21 - Prob. 21.5PCh. 21 - Change in Estimate, Inventory, Bad Debt Expense....Ch. 21 - Prob. 21.7PCh. 21 - Cases Judgment Case Judgment Case: Materiality and...Ch. 21 - Prob. 1FSCCh. 21 - Surfing the Standards: Change in Accounting...Ch. 21 - Prob. 1BCC
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