During 2022 (its first year of operations) and 2023, Fieri Foods used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2024, Fieri decided to change to the average method for both financial reporting and tax purposes. Income components before income tax for 2022, 2023, and 2024 were as follows: ($ in millions) Revenues Cost of goods sold (FIFO) Cost of goods sold (average) Operating expenses 2022 $ 510 (51) (78) (294) 2023 $ 520 (53) (82) (302) 2024 $ 550 (59) (88) (306) Dividends of $32 million were paid each year. Fieri's fiscal year ends December 31. Required: 1. Prepare the journal entry at the beginning of 2024 to record the change in accounting principle. (Ignore income taxes.) 2. Prepare the 2024-2023 comparative income statements. 3. & 4. Determine the balance in retained earnings at January 1, 2023, as Fieri reported using FIFO method and determine the adjustment of balance in retained earnings as on January 1, 2023 using average method instead of FIFO method.
During 2022 (its first year of operations) and 2023, Fieri Foods used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2024, Fieri decided to change to the average method for both financial reporting and tax purposes. Income components before income tax for 2022, 2023, and 2024 were as follows: ($ in millions) Revenues Cost of goods sold (FIFO) Cost of goods sold (average) Operating expenses 2022 $ 510 (51) (78) (294) 2023 $ 520 (53) (82) (302) 2024 $ 550 (59) (88) (306) Dividends of $32 million were paid each year. Fieri's fiscal year ends December 31. Required: 1. Prepare the journal entry at the beginning of 2024 to record the change in accounting principle. (Ignore income taxes.) 2. Prepare the 2024-2023 comparative income statements. 3. & 4. Determine the balance in retained earnings at January 1, 2023, as Fieri reported using FIFO method and determine the adjustment of balance in retained earnings as on January 1, 2023 using average method instead of FIFO method.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:During 2022 (its first year of operations) and 2023, Fieri Foods used the
FIFO inventory costing method for both financial reporting and tax
purposes. At the beginning of 2024, Fieri decided to change to the average
method for both financial reporting and tax purposes.
Income components before income tax for 2022, 2023, and 2024 were as
follows:
($ in millions)
Revenues
Cost of goods sold (FIFO)
Cost of goods sold (average)
Operating expenses
2022
$ 510
(51)
(78)
(294)
2023
2024
$ 520
$ 550
(53)
(59)
(82)
(88)
(302) (306)
Dividends of $32 million were paid each year. Fieri's fiscal year ends
December 31.
Required:
1. Prepare the journal entry at the beginning of 2024 to record the change
in accounting principle. (Ignore income taxes.)
2. Prepare the 2024-2023 comparative income statements.
3. & 4. Determine the balance in retained earnings at January 1, 2023, as
Fieri reported using FIFO method and determine the adjustment of balance
in retained earnings as on January 1, 2023 using average method instead
of FIFO method.
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