Chavez Wholesale Inc. changed its method of valuing inventory from the average cost method to the FIFO cost method at the beginning of 20x9. At December 31, 20x8, inventories were $230,000 (average cost basis). They were $238,000 a year earlier. Chavez Wholesale's accountants determined that the inventories would have totaled $286,000 at December 31, 20x8, and $275,000 at December 31, 20x7, if determined on a FIFO basis. A tax rate of 30% is in effect for all years. Pretax income was $1,100,000 in 20x8. Required - (a) Prepare the journal entry to record the change in policy. (b) What is the restated net income for the years ending December 31, 20x8.
Chavez Wholesale Inc. changed its method of valuing inventory from the average cost method to the FIFO cost method at the beginning of 20x9. At December 31, 20x8, inventories were $230,000 (average cost basis). They were $238,000 a year earlier. Chavez Wholesale's accountants determined that the inventories would have totaled $286,000 at December 31, 20x8, and $275,000 at December 31, 20x7, if determined on a FIFO basis. A tax rate of 30% is in effect for all years. Pretax income was $1,100,000 in 20x8. Required - (a) Prepare the journal entry to record the change in policy. (b) What is the restated net income for the years ending December 31, 20x8.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
please answer with good explanation
Transcribed Image Text:Chavez Wholesale Inc. changed its method of valuing inventory from the average cost
method to the FIFO cost method at the beginning of 20x9. At December 31, 20x8,
inventories were $230,000 (average cost basis). They were $238,000 a year earlier.
Chavez Wholesale's accountants determined that the inventories would have totaled
$286,000 at December 31, 20x8, and $275,000 at December 31, 20x7, if determined on a
FIFO basis. A tax rate of 30% is in effect for all years.
Pretax income was $1,100,000 in 20x8.
Required -
(a) Prepare the journal entry to record the change in policy.
(b) What is the restated net income for the years ending December 31, 20x8.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
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