Amber Corporation reported income from continuing operations of $1,600,000 (after taxes) for the fiscal year ended December 31, 2020. The following information, which has not yet been considered or included in the above figure, has been revealed as well: 1. On December31, 2020, Amber adopted the FIFO cost method of inventory valuation. The company had previously used the average method. The change increased income for 2020 by $50,000 (pre-tax) and the cumulative effect of the change on prior years' income was a S60,000 (pre-tax) increase. 2. Some equipment was sold for $100,000 cash during the year at a time when its book value was $140,000. (Depreciation has been correctly recorded.) Amber decided to discontinue its microchip division in 2020. During the current year, the loss on the disposal of this segment was $250,000 (before applicable taxes). 3. Instructions Present in good form the income statement of Amber Corporation for 2020 starting with "Income from continuing operations Assume that Amber's tax rate is 20% and that 200,000 common shares were outstanding during the year.

Amber Corporation reported income from continuing operations of $1,600,000 (after taxes) for the fiscal year ended December 31, 2020. The following information, which has not yet been considered or included in the above figure, has been revealed as well: 1. On December31, 2020, Amber adopted the FIFO cost method of inventory valuation. The company had previously used the average method. The change increased income for 2020 by $50,000 (pre-tax) and the cumulative effect of the change on prior years' income was a S60,000 (pre-tax) increase. 2. Some equipment was sold for $100,000 cash during the year at a time when its book value was $140,000. (Depreciation has been correctly recorded.) Amber decided to discontinue its microchip division in 2020. During the current year, the loss on the disposal of this segment was $250,000 (before applicable taxes). 3. Instructions Present in good form the income statement of Amber Corporation for 2020 starting with "Income from continuing operations Assume that Amber's tax rate is 20% and that 200,000 common shares were outstanding during the year.

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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The Cecil Booker Vending Company changed is method of valuing inventory from the average cost method to the FIFO cost method at the beginning of 2021. At December 31, 2020, inventories were $130,000 (average cost basis) and were $134,000 a year earlier. Cecil-Booker’s accountants determined that the inventories would have totaled $175,000 at December 31, 2020, and $180,000 at December 31, 2019, if determined on a FIFO basis. A tax rate of 25% is in effect for all years. One hundred thousand common shares were outstanding each year. Income from continuing operations was $500,000 in 2020 and $625,000 in 2021. There were no discontinued operations either year. Required: Prepare the journal entry at January 1, 2021, to record the change in accounting principle. (All tax effects should be reflected in the deferred tax liability account) Prepare the 2021-2020 comparative income statements beginning with income from continuing operations (adjusted for any revisions) include per share…
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