The Coclin Company has used the LIFO method of accounting for inventory during its first two years of operation, 2022 and 2023. At the beginning of 2024, Coclin decided to change to the average cost method for both tax and financial reporting purposes. The following table presents information concerning the change for 2022-2024. The income tax rate for all years is 25% 2022 2023 Total 2024 Income before Income Tax Using Average Cost Using LIFO Method Method $ 85,800 41,500 $ 57,200 33,200 $ 127,300 $ 90,400 $ 49,600 $ 45,300 Difference $ 28,600 8,300 $36,900 $4,300 Income Tax Effect $ 7,150 2,075 $9,225 $1,075 Difference after Tax $ 21,450 6,225 $ 27,675 $3,225 Coclin issued 42,000 $1 par, common shares for $195,000 when the business began, and there have been no changes in paid-in capital since then. Dividends were not paid the first year, but $12,000 cash dividends were paid in both 2023 and 2024 Required: 1. Prepare the journal entry at January 1, 2024, to record the change in accounting principle. 2. Prepare the 2024-2023 comparative income statements beginning with income before income taxes. 3. Prepare the 2024-2023 comparative statements of shareholders equity. [Hint: The 2022 statements reported retained earnings of $42,900 This is $57,200-($57,200 25%)
The Coclin Company has used the LIFO method of accounting for inventory during its first two years of operation, 2022 and 2023. At the beginning of 2024, Coclin decided to change to the average cost method for both tax and financial reporting purposes. The following table presents information concerning the change for 2022-2024. The income tax rate for all years is 25% 2022 2023 Total 2024 Income before Income Tax Using Average Cost Using LIFO Method Method $ 85,800 41,500 $ 57,200 33,200 $ 127,300 $ 90,400 $ 49,600 $ 45,300 Difference $ 28,600 8,300 $36,900 $4,300 Income Tax Effect $ 7,150 2,075 $9,225 $1,075 Difference after Tax $ 21,450 6,225 $ 27,675 $3,225 Coclin issued 42,000 $1 par, common shares for $195,000 when the business began, and there have been no changes in paid-in capital since then. Dividends were not paid the first year, but $12,000 cash dividends were paid in both 2023 and 2024 Required: 1. Prepare the journal entry at January 1, 2024, to record the change in accounting principle. 2. Prepare the 2024-2023 comparative income statements beginning with income before income taxes. 3. Prepare the 2024-2023 comparative statements of shareholders equity. [Hint: The 2022 statements reported retained earnings of $42,900 This is $57,200-($57,200 25%)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Subject : Accounting
Transcribed Image Text:The Coclin Company has used the LIFO method of accounting for inventory during its first two years of operation, 2022 and 2023. At
the beginning of 2024. Coclin decided to change to the average cost method for both tax and financial reporting purposes. The
following table presents information concerning the change for 2022-2024. The income tax rate for all years is 25%
2022
2023
Total
2024
Income before Income Tax
Using
Average Cost Using LIFO
Method
Method
$ 57,200
33,200
$ 90,400
$ 45,300
$ 85,800
41,500
$ 127,300
$ 49,600
Difference
$ 28,600
8,300
$36,900
$4,300
Income Tax
Effect
$ 7,150
2,075
$ 9,225
$ 1,075
Difference
after Tax
$ 21,450
6,225
$ 27,675
$3,225
Coclin issued 42,000 $1 par, common shares for $195,000 when the business began, and there have been no changes in paid-in
capital since then. Dividends were not paid the first year, but $12,000 cash dividends were paid in both 2023 and 2024
Required:
1. Prepare the journal entry at January 1, 2024, to record the change in accounting principle.
2. Prepare the 2024-2023 comparative income statements beginning with income before income taxes.
3. Prepare the 2024-2023 comparative statements of shareholders' equity. [Hint: The 2022 statements reported retained earnings of
$42,900. This is $57,200-($57,200 25%)).
Complete this question by entering your answers in the tabs below.
< Prev
3 of 6
Neyt S
![Complete this question by entering your answers in the tabs below.
Required 1 Required 2 Required 3
Prepare the 2024-2023 comparative statements of shareholders' equity. [Hint: The 2022 statements reported retained
earnings of $42,900. This is $57,200 ($57,200 x 25%).]
Note: Deductions should be indicated by a minus sign.
-
COCLIN COMPANY
Statement of Shareholders' Equity
For the Years Ended December 31, 2024 and 2023
Additional
Pald.in
Capital
Balance at January 1, 2023
Net income
Cash dividends
Balance at December 31, 2023
Net income
Cash dividends
Balance at December 31, 2024
Common
Stock
$
S
0 $
Retained
Earnings
0 $
Total
Shareholders'
Equilty
$
0 S
0
0](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8fc66754-dc05-453a-a4c8-c79196bcb5d1%2F22eadf90-b93e-4eab-bdf6-59d92d3a3d89%2Fwj2pggh_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Required 1 Required 2 Required 3
Prepare the 2024-2023 comparative statements of shareholders' equity. [Hint: The 2022 statements reported retained
earnings of $42,900. This is $57,200 ($57,200 x 25%).]
Note: Deductions should be indicated by a minus sign.
-
COCLIN COMPANY
Statement of Shareholders' Equity
For the Years Ended December 31, 2024 and 2023
Additional
Pald.in
Capital
Balance at January 1, 2023
Net income
Cash dividends
Balance at December 31, 2023
Net income
Cash dividends
Balance at December 31, 2024
Common
Stock
$
S
0 $
Retained
Earnings
0 $
Total
Shareholders'
Equilty
$
0 S
0
0
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