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Gordon Company started operations on January 1, 2015, and has used the FIFO method of inventory valuation since its inception. In 2021, it decides to switch to the average-cost method. You are provided with the following information.   Net Income Retained Earnings (Ending Balance)   Under FIFO Under Average-Cost Under FIFO 2015 $100,000 $  90,000 $100,000 2016     70,000     65,000   160,000 2017     90,000     80,000   235,000 2018   120,000   130,000   340,000 2019   300,000   290,000   590,000 2020   305,000   310,000   780,000 Instructions a.    What is the beginning retained earnings balance at January 1, 2017, if Gordon prepares comparative financial statements starting in 2017? b.    What is the beginning retained earnings balance at January 1, 2020, if Gordon prepares comparative financial statements starting in 2020? c.    What is the beginning retained earnings balance at January 1, 2021, if Gordon prepares single-period financial statements for 2021? d.    What is the net income reported by Gordon in the 2020 income statement if it prepares comparative financial statements starting with 2018?

Gordon Company started operations on January 1, 2015, and has used the FIFO method of inventory valuation since its inception. In 2021, it decides to switch to the average-cost method. You are provided with the following information.   Net Income Retained Earnings (Ending Balance)   Under FIFO Under Average-Cost Under FIFO 2015 $100,000 $  90,000 $100,000 2016     70,000     65,000   160,000 2017     90,000     80,000   235,000 2018   120,000   130,000   340,000 2019   300,000   290,000   590,000 2020   305,000   310,000   780,000 Instructions a.    What is the beginning retained earnings balance at January 1, 2017, if Gordon prepares comparative financial statements starting in 2017? b.    What is the beginning retained earnings balance at January 1, 2020, if Gordon prepares comparative financial statements starting in 2020? c.    What is the beginning retained earnings balance at January 1, 2021, if Gordon prepares single-period financial statements for 2021? d.    What is the net income reported by Gordon in the 2020 income statement if it prepares comparative financial statements starting with 2018?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Gordon Company started operations on January 1, 2015, and has used the FIFO method of inventory valuation since its inception. In 2021, it decides to switch to the average-cost method. You are provided with the following information.

 
Net Income
Retained Earnings (Ending Balance)
 
Under FIFO
Under Average-Cost
Under FIFO
2015
$100,000
$  90,000
$100,000
2016
    70,000
    65,000
  160,000
2017
    90,000
    80,000
  235,000
2018
  120,000
  130,000
  340,000
2019
  300,000
  290,000
  590,000
2020
  305,000
  310,000
  780,000

Instructions

a.    What is the beginning retained earnings balance at January 1, 2017, if Gordon prepares comparative financial statements starting in 2017?

b.    What is the beginning retained earnings balance at January 1, 2020, if Gordon prepares comparative financial statements starting in 2020?

c.    What is the beginning retained earnings balance at January 1, 2021, if Gordon prepares single-period financial statements for 2021?

d.    What is the net income reported by Gordon in the 2020 income statement if it prepares comparative financial statements starting with 2018?

 

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