Pharoah Co. decides at the beginning of 2025 to adopt the FIFO method of inventory valuation. Pharoah had used the LIFO method for financial reporting since its inception on January 1, 2023, and had maintained records adequate to apply the FIFO method retrospectively. Pharoah concluded that FIFO is the preferable inventory method because it reports the current cost of inventory on the balance sheet. The following table presents the effects of the change in accounting principles on inventory and cost of goods sold. Inventory Determined by Cost of Goods Sold Determined by Date LIFO Method FIFO Method LIFO Method FIFO Method January 1, 2023 $0 $0 $0 $0 December 31, 2023 110 90 750 770 December 31, 2024 200 260 940 860 December 31, 2025 320 400 1,150 1,130 Other information: 1. For each year presented, sales are $2,770 and operating expenses are $930. 2. Pharoah provides two years of financial statements. Earnings per share information is not required.
Pharoah Co. decides at the beginning of 2025 to adopt the FIFO method of inventory valuation. Pharoah had used the LIFO method for financial reporting since its inception on January 1, 2023, and had maintained records adequate to apply the FIFO method retrospectively. Pharoah concluded that FIFO is the preferable inventory method because it reports the current cost of inventory on the balance sheet. The following table presents the effects of the change in accounting principles on inventory and cost of goods sold. Inventory Determined by Cost of Goods Sold Determined by Date LIFO Method FIFO Method LIFO Method FIFO Method January 1, 2023 $0 $0 $0 $0 December 31, 2023 110 90 750 770 December 31, 2024 200 260 940 860 December 31, 2025 320 400 1,150 1,130 Other information: 1. For each year presented, sales are $2,770 and operating expenses are $930. 2. Pharoah provides two years of financial statements. Earnings per share information is not required.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 3P: Koopman Company began operations on January 1, 2018, and uses they FIFO inventory method for...
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