Millington Materials is a leading supplier of building equipment, building products, materials & timber for sale, with over 200 branches across the Mid-South. On January 1, 2016, management decided to change from the LIFO inventory costing method to the FIFO inventory costing method at each of its outlets. The following table presents information concerning the change. The income tax rate for all years is 40%. Income before Income Tax Average Cost Difference FIFO $8 million Before 2015 $15 million $7 million 8 million 5 million 3 million 2015 9 million 1 million 10 million 2016 Required: 1. Prepare the journal entry to record the change in accounting principle. (All tax effects should be reflected in the deferred tax liability account.) 2. Determine the net income to be reported in the 2016-2015 comparative income statements. 3. Which other 2015 amounts would be reported differently in the 2016-2015 comparative income statements and 2016-2015 comparative balance sheets than they were reported the previous year? 4. How would the change be reflected in the 2016-2015 comparative statements of shareholders' equity? Cash dividends were $1 million each year. Assume no dividends were paid prior to 2015.
Millington Materials is a leading supplier of building equipment, building products, materials & timber for sale, with over 200 branches across the Mid-South. On January 1, 2016, management decided to change from the LIFO inventory costing method to the FIFO inventory costing method at each of its outlets. The following table presents information concerning the change. The income tax rate for all years is 40%. Income before Income Tax Average Cost Difference FIFO $8 million Before 2015 $15 million $7 million 8 million 5 million 3 million 2015 9 million 1 million 10 million 2016 Required: 1. Prepare the journal entry to record the change in accounting principle. (All tax effects should be reflected in the deferred tax liability account.) 2. Determine the net income to be reported in the 2016-2015 comparative income statements. 3. Which other 2015 amounts would be reported differently in the 2016-2015 comparative income statements and 2016-2015 comparative balance sheets than they were reported the previous year? 4. How would the change be reflected in the 2016-2015 comparative statements of shareholders' equity? Cash dividends were $1 million each year. Assume no dividends were paid prior to 2015.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 4 images
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education