13. Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception of the company in 1979. In 2021, the company decided to switch to the average cost method. Data for 2021 are as follows: Beginning inventory, FIFO (5,000 units @ $26) $130,000 Purchases: 5,000 units @ $31$155,000 5,000 units @ $35 175,000 330,000 Cost of goods available for sale $460,000 Sales for 2021 (5,000 units @ $62) $310,000 Additional Information:The company's effective income tax rate is 25% for all years.If the company had used the average cost method prior to 2021, ending inventory for 2020 would have been $120,000.10,000 units remained in inventory at the end of 2021.Required:1. Ignoring income taxes, prepare the 2021 journal entry to adjust the accounts to reflect the average cost method.2. What is the effect of the change in methods on 2021 net income? Journal entry worksheetRecord adjustment to reflect average cost method.Note: Enter debits before credits.TransactionGeneral JournalDebitCredit1Record entryClear entryView general journal Complete this question by entering your answers in the tabs below.Required 1Required 2What is the effect of the change in methods on 2021 net income?The effect of the change for the year 2021 is asold resulting in ain cost of goodsin income before taxes and a(n)in income after tax.< Required 1Required 2 >

A journal entry is used to record the day-to-day transactions by debiting and crediting the…

Answered: Required: 1. Ignoring income taxes,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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13. Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception of the company in 1979. In 2021, the company decided to switch to the average cost method. Data for 2021 are as follows:


Beginning inventory, FIFO (5,000 units @ $26)			$	130,000
Purchases:
5,000 units @ $31	$	155,000
5,000 units @ $35		175,000		330,000
Cost of goods available for sale			$	460,000
Sales for 2021 (5,000 units @ $62)			$	310,000

Additional Information:

The company's effective income tax rate is 25% for all years.
If the company had used the average cost method prior to 2021, ending inventory for 2020 would have been $120,000.
10,000 units remained in inventory at the end of 2021.

Required:
1. Ignoring income taxes, prepare the 2021 journal entry to adjust the accounts to reflect the average cost method.
2. What is the effect of the change in methods on 2021 net income?

Journal entry worksheet
Record adjustment to reflect average cost method.
Note: Enter debits before credits.
Transaction
General Journal
Debit
Credit
1
Record entry
Clear entry
View general journal

Complete this question by entering your answers in the tabs below.
Required 1
Required 2
What is the effect of the change in methods on 2021 net income?
The effect of the change for the year 2021 is a
sold resulting in a
in cost of goods
in income before taxes and a(n)
in income after tax.
< Required 1
Required 2 >

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