Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2024 decided to change to the FIFO method. The inventory as reported at the end of 2023 using LIFO would have been $30 million higher using FIFO. Retained earnings reported at the end of 2022 and 2023 was $250 million and $270 million, respectively (reflecting the LIFO method). Those amounts reflecting the FIFO method would have been $260 million and $282 million, respectively. 2023 net income reported at the end of 2023 was $38 million (LIFO method) but would have been $40 million using FIFO. After changing to FIFO, 2024 net income was $46 million. Dividends of $9 million were paid each year. The tax rate is 25%. Required: 1. Prepare the journal entry at the beginning of 2024 to record the change in accounting principle. 2. In the 2024-2023 comparative Income statements, what will be the amounts of net Income reported for 2023 and 2024? 3. Prepare the 2024-2023 retained earnings column of the comparative statements of shareholders' equity.
Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2024 decided to change to the FIFO method. The inventory as reported at the end of 2023 using LIFO would have been $30 million higher using FIFO. Retained earnings reported at the end of 2022 and 2023 was $250 million and $270 million, respectively (reflecting the LIFO method). Those amounts reflecting the FIFO method would have been $260 million and $282 million, respectively. 2023 net income reported at the end of 2023 was $38 million (LIFO method) but would have been $40 million using FIFO. After changing to FIFO, 2024 net income was $46 million. Dividends of $9 million were paid each year. The tax rate is 25%. Required: 1. Prepare the journal entry at the beginning of 2024 to record the change in accounting principle. 2. In the 2024-2023 comparative Income statements, what will be the amounts of net Income reported for 2023 and 2024? 3. Prepare the 2024-2023 retained earnings column of the comparative statements of shareholders' equity.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Required 1 Required 2
Required 3
In the 2024-2023 comparative income statements, what will be the amounts of net income reported for 2023 and 2
Note: Enter your answers in millions (i.e., 10,000,000 should be entered as 10).
Net income
O
Required 1
2023
2024
($ in millions)
Show Transcribed Text
Required 2 Required 3
Prepare the 2024-2023 retained earnings column of the comparative statements of shareholders' equity.
Note: Enter your answers in millions (i.e., 10,000,000 should be entered as 10).
FANTASY FASHIONS
Statement of Shareholders' Equity
For the Years Ended December 31, 2024 and 2023
Additional
Paid-in Capital
Balance at January 1, 2023
Net income
Cash dividends
Balance at December 31, 2023
Net income
Cash dividends
Balance at December 31, 2024
Common Stock
Ċ
Retained
Total
Earnings ($ in Shareholders'
millions)
Equity
$
$
0
0
Transcribed Image Text:Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2024 decided to change to the FIFO
method. The inventory as reported at the end of 2023 using LIFO would have been $30 million higher using FIFO.
Retained earnings reported at the end of 2022 and 2023 was $250 million and $270 million, respectively (reflecting the LIFO method).
Those amounts reflecting the FIFO method would have been $260 million and $282 million, respectively. 2023 net income reported at
the end of 2023 was $38 million (LIFO method) but would have been $40 million using FIFO. After changing to FIFO, 2024 net income
was $46 million. Dividends of $9 million were paid each year. The tax rate is 25%.
Required:
1. Prepare the journal entry at the beginning of 2024 to record the change in accounting principle.
2. In the 2024-2023 comparative income statements, what will be the amounts of net income reported for 2023 and 2024?
3. Prepare the 2024-2023 retained earnings column of the comparative statements of shareholders' equity.
Complete this question by entering your answers in the tabs below.
Show Transcribed Text
Journal entry worksheet
< 1
Record the change in accounting principle.
Note: Enter debits before credits.
Event
General Journal
Debit
Credit
>
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