A21-20 Retrospective Policy Change (LO 21-3, 21-4, 21-6)Armstrong Ltd. has used the average cost (AC) method to determine inventory values since the company was first formed in 20X3. In20X7, the company decided to switch to the FIFO method, to conform to industry practice. Armstrong will still use average cost for taxpurposes. The tax rate is 40%. The following data have been assembled:Net income, as reported, after taxClosing inventory, AC20x3$82,000*20X4$98,800*20X551,60068,400Closing inventory, FIFODividends60,2007,60086,60010,600$327,600*84,80078,20010,60020X6$385,600*137,800127,20014,60020X7$182,800**169,200189,80020,600*Using the old policy, average cost**Using the new policy, FIFO.*Using the old policy, average cost**Using the new policy, FIFO.Required:Prepare the comparative retained earnings section of the statement of changes in shareholders' equity for 20X7, reflecting the changein accounting policy.ARMSTRONG LIMITEDComparative Retained Earnings StatementFor the Year Ended 31 December 20X720X720X6Opening retained earnings, 1 JanuaryCumulative effect of a change in accounting principlesOpening retained earnings restatedEarningsDividendsClosing retained earnings, 31 December00$0 $0

Financial statement:The financial statement is the statement or the record that is prepared by the…

A21-20 Retrospective Policy Change (LO 21-3, 21-4, 21-6) Armstrong Ltd. has used the average cost (AC) method to determine inventory values since the company was first formed in 20X3. In 20X7, the company decided to switch to the FIFO method, to conform to industry practice. Armstrong will still use average cost for tax purposes. The tax rate is 40%. The following data have been assembled: Net income, as reported, after tax Closing inventory, AC 20X3 $82,000* 20X4 $98,800* Closing inventory, FIFO 51,600 60,200 Dividends 7,600 68,400 86,600 10,600 20X5 $327,600* 84,800 78,200 10,600 20X6 20X7 $385,600* 137,800 127,200 14,600 $182,800 169,200 189,800 20,600 "Using the old policy, average cost **Using the new policy, FIFO. *Using the old policy, average cost **Using the new policy, FIFO. Required: Prepare the comparative retained earnings section of the statement of changes in shareholders' equity for 20X7, reflecting the change in accounting policy.

A21-20 Retrospective Policy Change (LO 21-3, 21-4, 21-6) Armstrong Ltd. has used the average cost (AC) method to determine inventory values since the company was first formed in 20X3. In 20X7, the company decided to switch to the FIFO method, to conform to industry practice. Armstrong will still use average cost for tax purposes. The tax rate is 40%. The following data have been assembled: Net income, as reported, after tax Closing inventory, AC 20X3 $82,000* 20X4 $98,800* Closing inventory, FIFO 51,600 60,200 Dividends 7,600 68,400 86,600 10,600 20X5 $327,600* 84,800 78,200 10,600 20X6 20X7 $385,600* 137,800 127,200 14,600 $182,800 169,200 189,800 20,600 "Using the old policy, average cost **Using the new policy, FIFO. *Using the old policy, average cost **Using the new policy, FIFO. Required: Prepare the comparative retained earnings section of the statement of changes in shareholders' equity for 20X7, reflecting the change in accounting policy.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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