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 $240,000 $271,800 $31,800 12/31/2019 245,200 299,600 54,400 12/31/2020 257,900 330,800 72,900 Frost reported net income of $2,457,000, $2,472,000, and $2,184,500 in 2018, 2019, and 2020, respectively. The tax rate is 30%. 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 $240,000 $271,800 $31,800 12/31/2019 245,200 299,600 54,400 12/31/2020 257,900 330,800 72,900 Frost reported net income of $2,457,000, $2,472,000, and $2,184,500 in 2018, 2019, and 2020, respectively. The tax rate is 30%. 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 | $240,000 | $271,800 | $31,800 |
| 12/31/2019 | 245,200 | 299,600 | 54,400 |
| 12/31/2020 | 257,900 | 330,800 | 72,900 |
Frost reported net income of $2,457,000, $2,472,000, and $2,184,500 in 2018, 2019, and 2020, respectively. The tax rate is 30%.
Required:
| 1. | Prepare the |
| 2. | What amount of net income would Frost report in 2018, 2019, and 2020? |
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