(Change in Principle—Inventory Methods) Holder-Webb Company began operations on January 1, 2015, and uses the average-cost method of pricing inventory. Management is contemplating a change in inventory methods for 2018. The following information is available for the years 2015–2017. Net Income Computed Using Average-Cost Method FIFO Method LIFO Method 2015 $15,000 $19,000 $12,000 2016 18,000 23,000 14,000 2017 20,000 25,000 17,000 Instructions(Ignore all tax effects.)(a) Prepare the journal entry necessary to record a change from the average-cost method to the FIFO method in 2018.(b) Determine net income to be reported for 2015, 2016, and 2017, after giving effect to the change in accounting principle.(c) Assume Holder-Webb Company used the LIFO method instead of the average-cost method during the years 2015–2017. In 2018, Holder-Webb changed to the FIFO method. Prepare the journal entry necessary to record the change in principle.
(Change in Principle—Inventory Methods) Holder-Webb Company began operations on January 1, 2015, and uses the average-cost method of pricing inventory. Management is contemplating a change in inventory methods for 2018. The following information is available for the years 2015–2017. Net Income Computed Using Average-Cost Method FIFO Method LIFO Method 2015 $15,000 $19,000 $12,000 2016 18,000 23,000 14,000 2017 20,000 25,000 17,000 Instructions(Ignore all tax effects.)(a) Prepare the journal entry necessary to record a change from the average-cost method to the FIFO method in 2018.(b) Determine net income to be reported for 2015, 2016, and 2017, after giving effect to the change in accounting principle.(c) Assume Holder-Webb Company used the LIFO method instead of the average-cost method during the years 2015–2017. In 2018, Holder-Webb changed to the FIFO method. Prepare the journal entry necessary to record the change in principle.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Topic Video
Question
(Change in Principle—Inventory Methods) Holder-Webb Company began operations on January 1, 2015, and uses the average-cost method of pricing inventory. Management is contemplating a change in inventory methods for 2018. The following information is available for the years 2015–2017.
| Net Income Computed Using | |||
| Average-Cost Method | FIFO Method | LIFO Method | |
| 2015 | $15,000 | $19,000 | $12,000 |
| 2016 | 18,000 | 23,000 | 14,000 |
| 2017 | 20,000 | 25,000 | 17,000 |
Instructions
(Ignore all tax effects.)
(a) Prepare the
(b) Determine net income to be reported for 2015, 2016, and 2017, after giving effect to the change in accounting principle.
(c) Assume Holder-Webb Company used the LIFO method instead of the average-cost method during the years 2015–2017. In 2018, Holder-Webb changed to the FIFO method. Prepare the journal entry necessary to record the change in principle.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 7 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education