Accounting for Correction of Errors, Change in Accounting Estimates and Accounting Policies Problem 1 CPA Co. has been using the FIFO method of inventory costing since it began operations in 2019. In 2020, the company decided to change to the weighted average method. The following are the December 31 inventory balances under each method: 2019 2020 FIFO P450,000 895,000 Weighted Average P560,000 999,000 _1. What is the cumulative effect of this accounting change in the January 1, 2020 Retained Earnings as a result of the accounting change? (Income tax rate is 30%) Indicate whether debit or credit.

Accounting for Correction of Errors, Change in Accounting Estimates and Accounting Policies Problem 1 CPA Co. has been using the FIFO method of inventory costing since it began operations in 2019. In 2020, the company decided to change to the weighted average method. The following are the December 31 inventory balances under each method: 2019 2020 FIFO P450,000 895,000 Weighted Average P560,000 999,000 _1. What is the cumulative effect of this accounting change in the January 1, 2020 Retained Earnings as a result of the accounting change? (Income tax rate is 30%) Indicate whether debit or credit.

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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Problem 2 CPA Co. had used the FIFO method of inventory valuation since it began operations in 2017. CPA Co. decided to change to the weighted average method for determining inventory costs at the beginning of 2019. The following schedule shows year-end inventory balances under FIFO and weighted average method. Weighted Average 5,400,000 7,100,000 7,800,000 Year 2017 FIFO 2018 2019 4,500,000 7,800,000 8,300,000 Assuming the income tax rate is 30%, what amount should be reported in the 2020 Statement of Changes in Equity as the cumulative effect of this accounting change? Indicate whether debit or credit.
Computed the corrected profit for the following year 2021 A.740,000 B. 650,000 c. 630,000 D. 560,000 2022 A. 670,000 B. 650,000 C. 470,000 D. 450,000
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Question 2 Grouper 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. 2018 2019 2020 Net Income Computed Using Average-Cost Method FIFO Method $15,910 $19.060 21,170 25,200 2018 (a) Prepare the journal entry necessary to record a change from the average cost method to the FIFO method in 2021. (Credit account titles are automatically indented when 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.) Account Titles and Explanation 2019 18,170 $ 19,880 $ (b) Determine net income to be reported for 2018, 2019, and 2020, after giving effect to the change in accounting principle. 2020 $ LIFO Method $12,010 14,110 17,040 Net Income Debit Account Titles and Explanation Credit (c) Assume Grouper Company used the LIFO method instead…