Sheffield Company began operations on January 1, 2018, and uses the average-cost method of pricing inventory. Management is contemplating a change in inventory methods for 2021. The following information is available for the years 2018–2020. Net Income Computed Using Average-Cost Method FIFO Method LIFO Method 2018 $16,010 $19,020 $12,120 2019 18,070 21,180 13,950 2020 20,200 25,010 17,110 (a) Prepare the journal entry necessary to record a change from the average cost method to the FIFO method in 2021. (b) Determine net income to be reported for 2018, 2019, and 2020, after giving effect to the change in accounting principle. (c) Assume Sheffield Company used the LIFO method instead of the average cost method during the years 2018–2020. In 2021, Sheffield changed to the FIFO method. Prepare the journal entry necessary to record the change in principle.
Sheffield Company began operations on January 1, 2018, and uses the average-cost method of pricing inventory. Management is contemplating a change in inventory methods for 2021. The following information is available for the years 2018–2020. Net Income Computed Using Average-Cost Method FIFO Method LIFO Method 2018 $16,010 $19,020 $12,120 2019 18,070 21,180 13,950 2020 20,200 25,010 17,110 (a) Prepare the journal entry necessary to record a change from the average cost method to the FIFO method in 2021. (b) Determine net income to be reported for 2018, 2019, and 2020, after giving effect to the change in accounting principle. (c) Assume Sheffield Company used the LIFO method instead of the average cost method during the years 2018–2020. In 2021, Sheffield changed to the FIFO method. Prepare the journal entry necessary to record the change in principle.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Sheffield Company began operations on January 1, 2018, and uses the average-cost method of pricing inventory. Management is contemplating a change in inventory methods for 2021. The following information is available for the years 2018–2020.
(a) Prepare thejournal entry necessary to record a change from the average cost method to the FIFO method in 2021.
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Net Income Computed Using
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|---|---|---|---|---|---|---|
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Average-Cost Method
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FIFO Method
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LIFO Method
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||||
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2018
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$16,010 | $19,020 | $12,120 | |||
|
2019
|
18,070 | 21,180 | 13,950 | |||
|
2020
|
20,200 | 25,010 | 17,110 |
(a) Prepare the
(b) Determine net income to be reported for 2018, 2019, and 2020, after giving effect to the change in accounting principle.
(c) Assume Sheffield Company used the LIFO method instead of the average cost method during the years 2018–2020. In 2021, Sheffield changed to the FIFO method. Prepare the journal entry necessary to record the change in principle.
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