Aquatic Equipment Corporation decided to switch from the LIFO method of costing inventories to the FIFO method at the beginning of 2024. The inventory as reported at the end of 2023 using LIFO would have been $70,000 higher using FIFO. Retained earnings at the end of 2023 was reported as $880,000 (reflecting the LIFO method). The tax rate is 34%. Required: Calculate the balance in retained earnings at the time of the change (beginning of 2024) as it would have been reported if FIFO had been used in prior years. Prepare the journal entry at the beginning of 2024 to record the change in accounting principle.
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- In 2020, Frost Company, which began operations in 2018, decided to change from LIFO to FIFO because management believed that FIFO belter represented the flow of their inventory. Management prepared the following analysis showing the effect of this change: Frost reported net income of 2,500,000, 2,400,000, and 2,100,000 in 2018, 2019, and 2020, respectively. The tax rate is 21%. Required: 1. Prepare the journal entry necessary to record the change. 2. What amount of net income would Frost report in 2018, 2019, and 2020? 3. If Frosts employees received a bonus of 10% of income before deducting the bonus and income taxes in 2018 and 2019, what would be the effect on net income for 2018, 2019, and 2020?Berg Company began operations on January 1, 2019, and uses the FIFO method in costing its raw materials inventory. During 2020, management is contemplating a change to the LIFO method and is interested in determining what effect such a change will have on net income. Accordingly, the following information has been developed: Required: What is the effect on income before income taxes in 2020 of a change to the LIFO method?Fava Company began operations in 2018 and used the LIFO inventory method for both financial reporting and income taxes. At the beginning of 2019, the anticipated cost trends in the industry had changed, so that it adopted the FIFO method for both financial reporting and income taxes. Fava reported revenues of 300,000 and 270,000 in 2019 and 2018, respectively. Fava reported expenses (excluding income tax expense) of 125,000 and 120,000 in 2019 and 2018, which included cost of goods sold of 55,000 and 45,000, respectively. An analysis indicates that the FIFO cost of goods sold would have been lower by 8,000 in 2018. The tax rate is 21%. Fava has a simple capital structure with 15,000 shares of common stock outstanding during 2018 and 2019. It paid no dividends in either year. Required: 1. Prepare the journal entry to reflect the change. 2. At the end of 2019, prepare the comparative income statements for 2019 and 2018. Notes to the financial statements are not necessary. 3. At the end of 2019, prepare the comparative retained earnings statements for 2019 and 2018.
- Schmidt Company began operations on January 1, 2018, and used the LIFO inventory method for both financial reporting and income taxes. However, at the beginning of 2020, Schmidt decided to switch to the average cost inventory method for financial and income tax reporting. It had previously reported the following financial statement information for 2019: An analysis of the accounting records discloses the following cost of goods sold under the LIFO and average cost inventory methods: There are no indirect effects of the change in inventory method. Revenues for 2020 total 130,000; operating expenses for 2020 total 30,000. Schmidt is subject to a 21% income tax rate in all years; it pays all income taxes payable in the next quarter. Assume that any deferred tax liability was paid in the subsequent year. Schmidt had 10,000 shares of common stock outstanding during all years; it paid dividends of 1 per share in 2020. At the end of 2020, Schmidt had cash of 15,600, inventory of 34,000, other assets of 76,000, income taxes payable of 4,200, and accounts payable of 3,000. It desires to show financial statements for the current year and previous year in its 2020 annual report. Required: 1. Prepare the journal entry to reflect the change in method at the beginning of 2020. Show supporting calculations. 2. Prepare the 2020 financial statements. Notes to the financial statements are not necessary. Show supporting calculations.Aquatic Equipment Corporation decided to switch from the LIFO method of costing inventories to the FIFO method at the beginning of 2024. The Inventory as reported at the end of 2023 using LIFO would have been $56,000 higher using FIFO. Retained earnings at the end of 2023 was reported as $740,000 (reflecting the LIFO method). The tax rate is 35%. Required: 1. Calculate the balance in retained earnings at the time of the change (beginning of 2024) as it would have been reported if FIFO had been used in prior years. 2. Prepare the journal entry at the beginning of 2024 to record the change in accounting principle. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entry at the beginning of 2024 to record the change in accounting principle. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. View transaction list Journal entry worksheet < 1 Record the change in…Aquatic Equipment Corporation decided to switch from the LIFO method of costing inventories to the FIFO method at the beginning 2021. The inventory as reported at the end of 2020 using LIFO would have been $66.000 higher using FIFO. Retained earnings at th end of 2020 was reported as $840,000 (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.
- Aquatic Equipment Corporation decided to switch from the LIFO method of costing inventories to the FIFO method at the beginning of 2021. The inventory as reported at the end of 2020 using LIFO would have been $60,000 higher using FIFO. Retained earnings at the end of 2020 was reported as $780,000 (reflecting the LIFO method). The tax rate is 25%.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.Aquatic Equipment Corporation decided to switch from the LIFO method of costing inventories to the FIFOmethod at the beginning of 2018. The inventory as reported at the end of 2017 using LIFO would have been$60,000 higher using FIFO. Retained earnings at the end of 2017 was reported as $780,000 (reflecting the LIFOmethod). The tax rate is 40%.Required:1. Calculate the balance in retained earnings at the time of the change (beginning of 2018) as it would have beenreported if FIFO had been used in prior years.2. Prepare the journal entry at the beginning of 2018 to record the change in accounting principleIn 2022, Kimberly Corporation changed its method of inventory pricing from LIFO to FIFO. Net income computed on a LIFO as compared to a FIFO basis for the four years involved is: (Ignore income taxes.) LIFO FIFO 2019 $78,600 $87,400 2020 84,000 88,900 2021 86,800 90,600 2022 92,800 92,200 Assume that the company had switched from the average cost method to the FIFO method with net income on an average cost basis for the four years as follows: 2019, $80,400; 2020, $86,120; 2021, $90,300; and 2018, $93,600. Indicate the net income that would be shown on comparative financial statements issued at 12/31/22 for each of the four years under these conditions. Net Income 2019 $ 2020 $ 2021 $ 2022 $
- In 2024, Banchero Corp. changed from a FIFO cost flow assumption to average cost flow assumption for inventory valuation in financial reporting. Banchero's tax rate is 20%, and Banchero has used, and will continue to use FIFO for tax reporting purposes. Below is a summary of cost of goods sold, as calculated under both methods, for Banchero's first three years of operations. 2022 2023 2024 FIFO COGS $205,100 $228,700 $226,400 Average cost COGS $236,800 $223,100 $258,700 Implementing the accounting change in 2024 will require a debit (enter as a positive number) or a credit (enter as a negative number) to retained earnings for what amount?Tulip Company decided to change from LIFO to FIFO inventory costing, effective January 1, 2020. The following data were available: Year Pretax Operating Excess of FIFO Ending Inventory Income using LIFO over LIFO Ending Inventory 2020 $40,000 $8,000 2019 20,000 7,000 2018 30,000 4,000 The income tax rate is 35%. The company began operations on January 1, 2018, and has paid no dividends since inception. Required: Answer the following questions relating to the 2019-2020 comparative financial statements. a. What is net income for 2020? b. What is restated net income for 2019? c. Prepare the 2019 statement of retained earnings as it would appear in the comparative 2019-2020 financial statements.Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2021 decided to change to the FIFO method. The inventory as reported at the end of 2020 using LIFO would have been $20 million higher using FIFO. Retained earnings reported at the end of 2019 and 2020 was $240 million and $260 million, respectively (reflecting the LIFO method). Those amounts reflecting the FIFO method would have been $250 million and $272 million, respectively. 2020 net income reported at the end of 2020 was $28 million (LIFO method) but would have been $30 million using FIFO. After changing to FIFO, 2021 net income was $36 million. Dividends of $8 million were paid each year. The tax rate is 25%.Required:1. Prepare the journal entry at the beginning of 2021 to record the change in accounting principle.2. In the 2021–2020 comparative income statements, what will be the amounts of net income reported for 2020 and 2021?3. Prepare the 2021–2020 retained earnings column of the…