Change in Inventory Pricing MethodThis represents a change from last-in, first-out to first-in, first-out method of inventory pricing. (cumulative effect on change of accounting policy)Required: Adjusting entry You have been engaged to audit FAR EASTERN COMPANY, a new client, for the year ended,December 31, 2021. The company prepared the trial balance set forth below, as of December 31,2021,theclose of its second year of operations.Account TitlesUnadjusted Trial BalanceDebitCreditCash112,600.00Marketable Securities72,000.00Allowance for decline in value of securitiesAccounts Receivable - Trade1,758,220.00Allowance for doubtful accounts40,000.00Accounts Receivable - OthersAdvances to affiliate48,000.00250,000.00Inventory, December 31, 2021Property, Plant and EquipmentAccumulated Depreciation2,770,000.00Accounts PayableIncome Tax PayableLong-term DebtOrdinary Share CapitalRetained EarningsRevaluation IncrementSalesCost of Sales2,269,604.00170,622.00Operating ExpensesOther Charges100,000.00Provision for Income Taxes (35%)80,954.00Discontinued Operations (Net)6,500.00Cumulative Effect of Change in Accounting Principle (Net)13,000.007,691,500.0020,000.0068,100.001,240,000.00408,616.0071,260.0060,000.002,042,000.00770,000.00240,000.002,771,524.007,691,500.00

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Description: Change in Inventory Pricing MethodThis represents a change from last-in, first-out to first-in, first-out method of inventory pricing. (cumulative effect on change of accounting policy)Required: Adjusting entry You have been engaged to audit FAR EAST

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Answered: Required: Adjusting entry

Business

Accounting

Required: Adjusting entry

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

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 12C

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Concept explainers

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.

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Question

Change in Inventory Pricing Method

This represents a change from last-in, first-out to first-in, first-out method of inventory pricing. (cumulative effect on change of accounting policy)

Required: Adjusting entry

You have been engaged to audit FAR EASTERN COMPANY, a new client, for the year ended,
December 31, 2021. The company prepared the trial balance set forth below, as of December 31,2021,the
close of its second year of operations.
Account Titles
Unadjusted Trial Balance
Debit
Credit
Cash
112,600.00
Marketable Securities
72,000.00
Allowance for decline in value of securities
Accounts Receivable - Trade
1,758,220.00
Allowance for doubtful accounts
40,000.00
Accounts Receivable - Others
Advances to affiliate
48,000.00
250,000.00
Inventory, December 31, 2021
Property, Plant and Equipment
Accumulated Depreciation
2,770,000.00
Accounts Payable
Income Tax Payable
Long-term Debt
Ordinary Share Capital
Retained Earnings
Revaluation Increment
Sales
Cost of Sales
2,269,604.00
170,622.00
Operating Expenses
Other Charges
100,000.00
Provision for Income Taxes (35%)
80,954.00
Discontinued Operations (Net)
6,500.00
Cumulative Effect of Change in Accounting Principle (Net)
13,000.00
7,691,500.00
20,000.00
68,100.00
1,240,000.00
408,616.00
71,260.00
60,000.00
2,042,000.00
770,000.00
240,000.00
2,771,524.00
7,691,500.00

Definition Definition Entries made at the end of every accounting period to precisely replicate the expenses and revenue of the current period. This is also known as end of period adjustment. It can also refer to financial reporting that corrects errors made previously in the accounting period. Every adjustment entry affects at least one real account and one nominal account.

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