In 2020, Frost Company, which began operations in 2018, decided to change from LIFO to FIFO because management believed that FIFO better represented the flow of their inventory. Management prepared the following analysis showing the effect of this change: Ending Inventory LIFO FIFO Cumulative Difference 12/31/2018 $241,500 $272,400 $30,900 12/31/2019 243,400 301,800 58,400 12/31/2020 257,100 327,800 70,700 Frost reported net income of $2,399,500, $2,369,500, and $2,185,500 in 2018, 2019, and 2020, respectively. The tax rate is 35%. Required: 1. Prepare the journal entry necessary to record the change. 2. What amount of net income would Frost report in 2018, 2019, and 2020?
In 2020, Frost Company, which began operations in 2018, decided to change from LIFO to FIFO because management believed that FIFO better represented the flow of their inventory. Management prepared the following analysis showing the effect of this change: Ending Inventory LIFO FIFO Cumulative Difference 12/31/2018 $241,500 $272,400 $30,900 12/31/2019 243,400 301,800 58,400 12/31/2020 257,100 327,800 70,700 Frost reported net income of $2,399,500, $2,369,500, and $2,185,500 in 2018, 2019, and 2020, respectively. The tax rate is 35%. Required: 1. Prepare the journal entry necessary to record the change. 2. What amount of net income would Frost report in 2018, 2019, and 2020?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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In 2020, Frost Company, which began operations in 2018, decided to change from LIFO to FIFO because management believed that FIFO better represented the flow of their inventory. Management prepared the following analysis showing the effect of this change:
|
Ending Inventory
|
LIFO
|
FIFO
|
Cumulative Difference
|
| 12/31/2018 | $241,500 | $272,400 | $30,900 |
| 12/31/2019 | 243,400 | 301,800 | 58,400 |
| 12/31/2020 | 257,100 | 327,800 | 70,700 |
Frost reported net income of $2,399,500, $2,369,500, and $2,185,500 in 2018, 2019, and 2020, respectively. The tax rate is 35%.
Required:
| 1. | Prepare the |
| 2. | What amount of net income would Frost report in 2018, 2019, and 2020? |
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