#54 On January 1, 2021, Frost Corp. changed its inventory method to FIFO from LIFO for both financial and income tax reporting purposes. The change resulted in a $900,000 increase in the January 1, 2021 inventory. Assume that the income tax rate for all years is 20%. The cumulative effect of the accounting change should be reported by Frost in its 2021 Question 54 options: a retained earnings statement as a $900,000 addition to the beginning balance. b income statement as a $720,000 cumulative effect of accounting change. c income statement as a $900,000 cumulative effect of accounting change. d retained earnings statement as a $720,000 addition to the beginning balance.
#54 On January 1, 2021, Frost Corp. changed its inventory method to FIFO from LIFO for both financial and income tax reporting purposes. The change resulted in a $900,000 increase in the January 1, 2021 inventory. Assume that the income tax rate for all years is 20%. The cumulative effect of the accounting change should be reported by Frost in its 2021 Question 54 options: a retained earnings statement as a $900,000 addition to the beginning balance. b income statement as a $720,000 cumulative effect of accounting change. c income statement as a $900,000 cumulative effect of accounting change. d retained earnings statement as a $720,000 addition to the beginning balance.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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#54
On January 1, 2021, Frost Corp. changed its inventory method to FIFO from LIFO for both financial and income tax reporting purposes. The change resulted in a $900,000 increase in the January 1, 2021 inventory. Assume that the income tax rate for all years is 20%. The cumulative effect of the accounting change should be reported by Frost in its 2021
Question 54 options:
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a
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b
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income statement as a $720,000 cumulative effect of accounting change.
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c
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income statement as a $900,000 cumulative effect of accounting change.
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d
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retained earnings statement as a $720,000 addition to the beginning balance.
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