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Second Thought Products (STP) began operations on January 1, 2021, and adopted the FIFO method of inventory valuation at that time. Management elected to change its inventory method to the average-cost method effective January 1, 2024. The new method more fairly presents the company's financial position and results of operations. The following information is available for the EE (Click the icon to view the income information for both methods.) years ended December 31, 2021, through December 31, 2024. STP is subject to a 40% income tax rate. The company still uses the FIFO method for income tax reporting. Read the requirements. Change in Cost Change in Cost Cumulative Change of Goods Sold Year 2021 Method FIFO Method Pre-Tax of Goods Sold Net of Tax in Cost of Goods Sold Requirement a. Compute the cumulative effect, net of tax, for the 3-year period needed to record a change from the FIFO method to the average-cost method. (Use a minus sign or parentheses for any decreases in income.) Cost of Goods Sold Under Average-Cost Net of Tax Income Information $ 176,400 117,600 $ 201,600 134,400 252,000 277,200 2022 2023 Requirement b. Prepare the journal entry to record the change in accounting for inventory valuation. (Record debits first, then credits. Exclude explanations from any journal entries.) Account January 1, 2024 Requirement c. Indicate the cost of goods sold reported on the income statement for 2021, 2022, 2023, and 2024. Cost of Goods Sold under the Average- Year Cost Method 2021 2022 2023 2024 Cost of Goods Sold Under Average Cost Year Method FIFO Method 2021 2022 $ 176,400 $ 201,600 117,600 134,400 2023 252,000 277,200 2024 285,600 260,400 Print Done - X

Second Thought Products (STP) began operations on January 1, 2021, and adopted the FIFO method of inventory valuation at that time. Management elected to change its inventory method to the average-cost method effective January 1, 2024. The new method more fairly presents the company's financial position and results of operations. The following information is available for the EE (Click the icon to view the income information for both methods.) years ended December 31, 2021, through December 31, 2024. STP is subject to a 40% income tax rate. The company still uses the FIFO method for income tax reporting. Read the requirements. Change in Cost Change in Cost Cumulative Change of Goods Sold Year 2021 Method FIFO Method Pre-Tax of Goods Sold Net of Tax in Cost of Goods Sold Requirement a. Compute the cumulative effect, net of tax, for the 3-year period needed to record a change from the FIFO method to the average-cost method. (Use a minus sign or parentheses for any decreases in income.) Cost of Goods Sold Under Average-Cost Net of Tax Income Information $ 176,400 117,600 $ 201,600 134,400 252,000 277,200 2022 2023 Requirement b. Prepare the journal entry to record the change in accounting for inventory valuation. (Record debits first, then credits. Exclude explanations from any journal entries.) Account January 1, 2024 Requirement c. Indicate the cost of goods sold reported on the income statement for 2021, 2022, 2023, and 2024. Cost of Goods Sold under the Average- Year Cost Method 2021 2022 2023 2024 Cost of Goods Sold Under Average Cost Year Method FIFO Method 2021 2022 $ 176,400 $ 201,600 117,600 134,400 2023 252,000 277,200 2024 285,600 260,400 Print Done - X

Intermediate Accounting: Reporting And Analysis
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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Second Thought Products (STP) began operations on January 1, 2021, and adopted the FIFO method of inventory valuation at that time. Management elected to change its inventory method to the average-cost method effective January 1, 2024. The new method more fairly presents the company's financial position and results of operations. The following information is available for the EE (Click the icon to view the income information for both methods.) years ended December 31, 2021, through December 31, 2024. STP is subject to a 40% income tax rate. The company still uses the FIFO method for income tax reporting. Read the requirements. Change in Cost Change in Cost Cumulative Change of Goods Sold Year 2021 Method FIFO Method Pre-Tax of Goods Sold Net of Tax in Cost of Goods Sold Requirement a. Compute the cumulative effect, net of tax, for the 3-year period needed to record a change from the FIFO method to the average-cost method. (Use a minus sign or parentheses for any decreases in income.) Cost of Goods Sold Under Average-Cost Net of Tax Income Information $ 176,400 117,600 $ 201,600 134,400 252,000 277,200 2022 2023 Requirement b. Prepare the journal entry to record the change in accounting for inventory valuation. (Record debits first, then credits. Exclude explanations from any journal entries.) Account January 1, 2024 Requirement c. Indicate the cost of goods sold reported on the income statement for 2021, 2022, 2023, and 2024. Cost of Goods Sold under the Average- Year Cost Method 2021 2022 2023 2024 Cost of Goods Sold Under Average Cost Year Method FIFO Method 2021 2022 $ 176,400 $ 201,600 117,600 134,400 2023 252,000 277,200 2024 285,600 260,400 Print Done - X
Transcribed Image Text:Second Thought Products (STP) began operations on January 1, 2021, and adopted the FIFO method of inventory valuation at that time. Management elected to change its inventory method to the average-cost method effective January 1, 2024. The new method more fairly presents the company's financial position and results of operations. The following information is available for the EE (Click the icon to view the income information for both methods.) years ended December 31, 2021, through December 31, 2024. STP is subject to a 40% income tax rate. The company still uses the FIFO method for income tax reporting. Read the requirements. Change in Cost Change in Cost Cumulative Change of Goods Sold Year 2021 Method FIFO Method Pre-Tax of Goods Sold Net of Tax in Cost of Goods Sold Requirement a. Compute the cumulative effect, net of tax, for the 3-year period needed to record a change from the FIFO method to the average-cost method. (Use a minus sign or parentheses for any decreases in income.) Cost of Goods Sold Under Average-Cost Net of Tax Income Information $ 176,400 117,600 $ 201,600 134,400 252,000 277,200 2022 2023 Requirement b. Prepare the journal entry to record the change in accounting for inventory valuation. (Record debits first, then credits. Exclude explanations from any journal entries.) Account January 1, 2024 Requirement c. Indicate the cost of goods sold reported on the income statement for 2021, 2022, 2023, and 2024. Cost of Goods Sold under the Average- Year Cost Method 2021 2022 2023 2024 Cost of Goods Sold Under Average Cost Year Method FIFO Method 2021 2022 $ 176,400 $ 201,600 117,600 134,400 2023 252,000 277,200 2024 285,600 260,400 Print Done - X
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