3 5.Goldmeyer Company has used the FIFO method of inventory valuation since it began operations in2021. Goldmeyer decided to change to the average cost method for determining inventory costs atthe beginning of 2024. The following schedule shows year-end inventory balances under the FIFOand average cost methods:IYear202120222023FIFO$ 46,20081,60087,800Average Cost$ 56,40072,20081,600Required:1. Ignoring income taxes, prepare the 2024 journal entry to adjust the accounts to reflect theaverage cost method.2.How much higher or lower would cost of goods sold be in the 2023 revised incomestatement?

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Description: 3 5.Goldmeyer Company has used the FIFO method of inventory valuation since it began operations in2021. Goldmeyer decided to change to the average cost method for determining inventory costs atthe beginning of 2024. The following schedule shows year-

Inventory includes all the items, merchandise, and raw materials that are used by the business…

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5. Goldmeyer Company has used the FIFO method of inventory valuation since it began operations in 2021. Goldmexer decided to change to the average cost method for determining inventory costs at the beginning of 2024. The following schedule shows year-end inventory balances under the FIFO and average cost methods: Year 2021 2022 2023 FIFO $ 46,200 81,600 87,800 Average Cost $ 56,400 72,200 81,600 Required: 1. Ignoring income taxes, prepare the 2024 journal entry to adjust the accounts to reflect the average cost method. 2. How much higher or lower would cost of goods sold be in the 2023 revised income statement?

5. Goldmeyer Company has used the FIFO method of inventory valuation since it began operations in 2021. Goldmexer decided to change to the average cost method for determining inventory costs at the beginning of 2024. The following schedule shows year-end inventory balances under the FIFO and average cost methods: Year 2021 2022 2023 FIFO $ 46,200 81,600 87,800 Average Cost $ 56,400 72,200 81,600 Required: 1. Ignoring income taxes, prepare the 2024 journal entry to adjust the accounts to reflect the average cost method. 2. How much higher or lower would cost of goods sold be in the 2023 revised income statement?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.

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Question

5.
Goldmeyer Company has used the FIFO method of inventory valuation since it began operations in
2021. Goldmeyer decided to change to the average cost method for determining inventory costs at
the beginning of 2024. The following schedule shows year-end inventory balances under the FIFO
and average cost methods:
I
Year
2021
2022
2023
FIFO
$ 46,200
81,600
87,800
Average Cost
$ 56,400
72,200
81,600
Required:
1. Ignoring income taxes, prepare the 2024 journal entry to adjust the accounts to reflect the
average cost method.
2.
How much higher or lower would cost of goods sold be in the 2023 revised income
statement?

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