Pronghorn Co. decides at the beginning of 2025 to adopt the FIFO method of inventory valuation. Pronghorn 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. Pronghorn 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. Date January 1, 2023 December 31, 2023 December 31, 2024 December 31, 2025 Other information: 1. Inventory Determined by LIFO Method 2. $0 100 190 330 FIFO Method $0 90 250 420 Cost of Goods Sold Determined by LIFO Method $0 800 920 1,160 FIFO Method $0 810 850 1,130 For each year presented, sales are $2,960 and operating expenses are $920. Pronghorn provides two years of financial statements. Earnings per share information is not required.

Pronghorn Co. decides at the beginning of 2025 to adopt the FIFO method of inventory valuation. Pronghorn 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. Pronghorn 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. Date January 1, 2023 December 31, 2023 December 31, 2024 December 31, 2025 Other information: 1. Inventory Determined by LIFO Method 2. $0 100 190 330 FIFO Method $0 90 250 420 Cost of Goods Sold Determined by LIFO Method $0 800 920 1,160 FIFO Method $0 810 850 1,130 For each year presented, sales are $2,960 and operating expenses are $920. Pronghorn 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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Grimstad Company uses FIFO for internal reporting purposes and LIFO for financial reporting and income tax purposes. At the end of 2019, the following information was obtained from the inventory records: Required: 1. Prepare the necessary adjusting journal entry assuming that Grimstad converts the accounts to LIFO at the end of 2019. 2. Indicate how Grimstad would disclose the inventory value on its comparative balance sheets prepared at the end of 2019. 3. Next Level By how much would Grimstads cost of goods sold differ in 2019 if it used FIFO for external reporting?
Refer to the information provided in RE8-4. If Paul Corporations inventory at January 1, 2019, had a cost and net realizable value of 300,000, prepare the journal entry to record the reductions to NRV for Paul Corporation assuming that Paul uses a periodic inventory system and the direct method. Paul Corporation uses FIFO and reports the following inventory information: Assuming Paul uses a perpetual inventory system and the direct method, prepare the journal entry to record the write-down of inventory.
Refer to the information provided in RE8-4. If Paul Corporations inventory at January 1, 2019, had a cost and net realizable value of 300,000, prepare the journal entry to record the reductions to NRV for Paul Corporation assuming that Paul uses a periodic inventory system and the allowance method. Paul Corporation uses FIFO and reports the following inventory information: Assuming Paul uses a perpetual inventory system and the direct method, prepare the journal entry to record the write-down of inventory.
Olson Company adopted the dollar-value LIFO method for inventory valuation at the beginning of 2015. The following information about the inventory at the end of each year is available from Olsons records: Required: 1. Calculate the dollar-value LIFO inventory at the end of each year. 2. Prepare the appropriate disclosures for the 2021 annual report if Olson uses current cost internally and LIFO for financial reporting.
Koopman Company began operations on January 1, 2018, and uses they FIFO inventory method for financial reporting and the average cost inventory method for income taxes. At the beginning of 2020, Koopman decided to switch to the average cost inventory method for financial reporting. It had previously reported the following financial statement information for 2019: An analysis of the accounting records discloses the following cost of goods sold under the FIFO and average cost inventory methods: There are no indirect effects of the change in inventory method. Revenues for 2020 total 130,000; operating expenses for 2020 total 30,000. Koopman is subject to a 21% income tax rate in all years; it pays the income taxes payable of a current year in the first quarter of the next year. Koopman had 10,000 shares of common stock outstanding during all years; it paid dividends of 1 per share in 2020. At the end of 2020, Koopman had cash of 10,000, inventory of 24,000, other assets of 70,800, accounts payable of 4,500, and income taxes payable of 6,000. It desires to show financial statements for the current year and previous year in its 2020 annual report. Required: 1. Prepare the journal entry to reflect the change in methods at the beginning of 2020. Show supporting calculations. 2. Prepare the 2020 financial statements. Notes to the financial statements are not necessary. Show supporting calculations.
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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.
Taveras Co. decides at the beginning of 2020 to adopt the FIFO method of inventory valuation. Taveras had used the LIFO method for financial reporting since its inception on January 1, 2018, and had maintained records adequate to apply the FIFO method retrospectively. Taveras concluded that FIFO is the preferable inventory method because it reflects 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, 2018 $ 0 $ 0 $ 0 $ 0 December 31, 2018 100 80 800 820 December 31, 2019 200 240 1,000 940 December 31, 2020 320 390 1,130 1,100 Other information: 1. For each year presented, sales are $3,000 and operating expenses are $1,000. 2.…
Vaughn Co. decides at the beginning of 2020 to adopt the FIFO method of inventory valuation. Vaughn had used the LIFO method for financial reporting since its inception on January 1, 2018, and had maintained records adequate to apply the FIFO method retrospectively. Vaughn concluded that FIFO is the preferable inventory method because it reflects 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. Income taxes are ignored. Inventory Determined by Cost of Goods Sold Determined by Date LIFO Method FIFO Method LIFO Method FIFO Method January 1, 2018 $ 0 $ 0 $ 0 $ 0 December 31, 2018 100 8 800 892 December 31, 2019 200 220 940 828 December 31, 2020 350 410 1,100 1,060 Retained earnings reported under LIFO are as follows. Retained Earnings Balance December 31, 2018 $1,060…
Goddard Company had used the FIFO method of inventory The entity provided the following year-end inventory valuation since it began operations in 2018. The entity decidel to change to the weighted average method for determining Problem 8-15 (AICPA Adapted) inventory cost at the beginning of 2021. balances under FIFO and weighted average method: FIFO Weighted average Year 2018 2019 2020 4,500,000 7,800,000 8,300,000 5,400,000 7,100,000 7,800,000 What pretax amount should be reported in the 2021 statement of changes in equity as the cumulative effect of the change in accounting policy? a. 500,000 decrease b. 300,000 decreasc c. 500,000 increase d. 300,000 increase
Goddard Company has used the FIFO method of inventory valuation since it began operations in 2018. The entity decided to change to the weighted average method for determining inventory costs at the beginning of 2021. The provided the year-end inventory balances under the FIFO and weighted average methods: Year FIFO Average Cost 2018 4,500,000 5,400,000 2019 7,800,000 7,100,000 2020 8,300,000 7,800,000 REQUIRED: What pretax amount should be reported in the 2021 statement of changes in equity as the cumulative effect of the change in accounting policy? a. 500,000 decrease b. 300,000 decrease c. 500,000 increase d. 300,000 increase
At the begining of 2020, Flynne Company decided to change from the LIFO to the FIFO inventory cost flow assumption. The following data are available: 1. Prepare the journal entry at the beginning of 2020 to reflect the change. 2. At the end of 2020, prepare comparative income statements for 2020 and 2019. 3. At the end of 2020, prepare comparative retained earnings statements for 2020 and 2019. 4. Prepare a note to the comparative financial statements that discusses the nature and reason for the change from LIFO to FIFO and discloses the effects of the change on the company’s income statement for 2019 and 2020. (Ignore the effects on the balance sheet and statement of cash flows because there is…