Flay Foods has always used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2021,Flay decided to change to the LIFO method. As a result of the change, net income in 2021 was $80 million. If the company had usedLIFO in 2020, its cost of goods sold would have been higher by $6 million that year. Flay's records of inventory purchases and salesare not available for 2019 and several previous years. Last year, Flay reported the following net income amounts in its comparativeincome statements:(5 in millions)Net income2018 2019 2020$80 $82$84Required:1. Prepare the journal entry at the beginning of 2021 to record the change in accounting principle. (Ignore income taxes)3. What amounts will Flay report for net income in its 2019-2021 comparative income statements?Complete this question by entering your answers in the tabs below.Required 1 Required 3 Required 1Required 3What amounts will Flay report for net income in its 2019-2021 comparative incomemillions (i.e., 10,000,000 should be entered as 10).)201920202021($ in millions)Net incomeFIFOLIFO (revised)LIFO

FIFO is the method wherein the inventory bought first is sold first. Thus, whenever there are rising…

Flay Foods has always used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2021, Flay decided to change to the LIFO method. As a result of the change, net income in 2021 was $80 million. If the company had used LIFO in 2020, its cost of goods sold would have been higher by $6 million that year. Flay's records of inventory purchases and sales are not available for 2019 and several previous years. Last year, Flay reported the following net income amounts in its comparative income statements: (5 in millions) Net income Required: 2018 2019 2020 $80 $82 $84 1. Prepare the journal entry at the beginning of 2021 to record the change in accounting principle. (Ignore income taxes) 3. What amounts will Flay report for net income in its 2019-2021 comparative income statements?

Flay Foods has always used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2021, Flay decided to change to the LIFO method. As a result of the change, net income in 2021 was $80 million. If the company had used LIFO in 2020, its cost of goods sold would have been higher by $6 million that year. Flay's records of inventory purchases and sales are not available for 2019 and several previous years. Last year, Flay reported the following net income amounts in its comparative income statements: (5 in millions) Net income Required: 2018 2019 2020 $80 $82 $84 1. Prepare the journal entry at the beginning of 2021 to record the change in accounting principle. (Ignore income taxes) 3. What amounts will Flay report for net income in its 2019-2021 comparative income statements?

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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On January 1, 2023, Cullumber Ltd. changed its inventory valuation method from weighted-average cost to FIFO for financial statement and income tax purposes, to make its reporting as reliable and more relevant. The change resulted in a $914000 increase in the beginning inventory at January 1, 2023. Assume a 25% income tax rate. The cumulative effect of this accounting change reported for the year ended December 31, 2023 is Ⓒ $228500. Ⓒ$914000. $0. $685500.
Aquatic Equipment Corporation decided to switch from the LIFO method of costing inventories to the FIFO method at the beginning of 2024. The inventory as reported at the end of 2023 using LIFO would have been $67,000 higher using FIFO. Retained earnings at the end of 2023 was reported as $850,000 (reflecting the LIFO method). The tax rate is 34%. Required: Calculate the balance in retained earnings at the time of the change (beginning of 2024) as it would have been reported if FIFO had been used in prior years. Prepare the journal entry at the beginning of 2024 to record the change in accounting principle.
In 2020 Fy Co. decided to change to the FIFO method for inventory . The Cost of Goods Sold in 1919 was $300,000 under LIFO. Under FIFO it would have been $250,000 . In 2020 under FIFO Cost of Goods Sold would have been $360,000 whereas under LIFO It would have been $410,000. Journalize all necessary adjusting entries for 2020.
ABC Company experienced a decline in the value of its inventory in 2020 which resulted in a write-down from a cost of P2.400,000 to net realizable value of P1,650,000. The entity's practice is to use the allowance method in recording necessary adjustments. In 2021, market conditions have improved and on December 31, 2021, the inventory had a cost of P4,200,000 and net realizable value of 3,750.000. Compute for the amount of gain on reversal of inventory write-down on December 31,2021.
On January 1, 2023 , Linda Corp. changed from the average cost to the dollar value LIFO method for accounting for inventory. The change results in a decrease in ending inventory of $45,497,000 for the year. How should the effect of this change be reported by Linda Corp. in 2023? (RE& CF 1) As an increase to beginning RE of $ 45,497,000 As a decrease to beginning RE of $45,497,000 As an increase to net income of $45,497,000 As a decrease to net income of $45,497,000
Aquatic Equipment Corporation decided to switch from the LIFO method of costing inventories to the FIFO method at the beginning 2021. The inventory as reported at the end of 2020 using LIFO would have been $66.000 higher using FIFO. Retained earnings at th end of 2020 was reported as $840,000 (reflecting the LIFO method). The tax rate is 40%. Required: 1. Calculate the balance in retained earnings at the time of the change (beginning of 2021) as it would have been reported if FIFO had been used in prior years. 2. Prepare the journal entry at the beginning of 2021 to record the change in accounting principle. Complete this question by entering your answers in the tabs below.
Tulip Company decided to change from LIFO to FIFO inventory costing, effective January 1, 2020. The following data were available: Year Pretax Operating Excess of FIFO Ending Inventory Income using LIFO over LIFO Ending Inventory 2020 $40,000 $8,000 2019 20,000 7,000 2018 30,000 4,000 The income tax rate is 35%. The company began operations on January 1, 2018, and has paid no dividends since inception. Required: Answer the following questions relating to the 2019-2020 comparative financial statements. a. What is net income for 2020? b. What is restated net income for 2019? c. Prepare the 2019 statement of retained earnings as it would appear in the comparative 2019-2020 financial statements.
On January 1, 2020, Crow Company changed from FIFO to LIFO for income tax and external reporting purpos- es. On that same date, the beginning FIFO inventory (the base inventory for LIFO purposes) was $95,000. The following information is available from Crow's records for years 2020 through 2023. Year 2020 2021 2022 2023 Ending Inventory on a FIFO Basis Ending Inventory at Base Year Costs $113,600 84,600 85,200 92,900 a. $125,000 110,000 115,000 130,000 Required Compute the price indices used to calculate ending inventory at base year costs. Round to two decimals. Hint: Divide ending inventory on a FIFO basis by ending inventory at base year for each year. b. Compute the ending inventory on a dollar-value LIFO basis for each year, 2020 through 2023. Prepare the journal entry at each year-end, 2020 through 2023, to adjust inventory to LIFO.
During 2021, P Company discovered that the ending inventories reported on its financial statements were incorrect by the following amounts: 2019 $ 120,000 understated 2020 $ 150,000 overstated *Note any error of 2019 ending inventory is carried over to 2020 as an error of the beginning inventory. P uses the periodic inventory system to ascertain year-end quantities that are converted to dollar amounts using the FIFO cost method. Prior to any adjustments for these errors and ignoring income taxes, P's retained earnings at January 1, 2021, would be: O Correct. O $30,000 overstated O $150,000 overstated. O $270,000 overstated.
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Tulip Company decided to change from LIFO to FIFO inventory costing, effective January 1, 2020. The following data were available: Year Pretax Operating Excess of FIFO Ending Inventory Income using LIFO over LIFO Ending Inventory 2020 $40,000 $8,000 2019 20,000 7,000 2018 30,000 4,000 The income tax rate is 35%. The company began operations on January 1, 2018, and has paid no dividends since inception. Required: Answer the following questions relating to the 2019-2020 comparative financial statements. a. What is net income for 2020? b. What is restated net income for 2019? c. Prepare the 2019 statement of retained earnings as it would appear in the comparative 2019-2020 financial statements.
Webster Products, Inc., adopted the dollar-value LIFO method of determining inventory costs for financial and income tax reporting on January 1, 2021. Webster continues to use the FIFO method for internal decision-making purposes. Webster's FIFO inventories at December 31, 2021, 2022, and 2023, were $300.000, $412.500, and $585,000, respectively. Internally generated cost indexes are used to convert FIFO inventory amounts to dollar-value LIFO amounts. Webster estimated these indexes as follows: 2021 2022 2823 1.00 1.25 1.50 Required: 1. Determine Webster's dollar-value LIFO inventory at December 31, 2022 and 2023. 2. Will Webster account for the change (a) retrospectively or (b) prospectively? 1. LIFO inventory at 2022 LIFO inventory at 2023 2. Webster account for the change