The management of Jones Company has asked its accounting department to describe the effect upon the company’s financial position and its income statements of accounting for inventories on the LIFO rather than the FIFO basis during 2017 and 2018. The accounting department is to assume that the change to LIFO would have been effective on January 1, 2017, and that the initial LIFO base would have been the inventory value on December 31, 2016. The following are the company’s financial statements and other data for the years 2017 and 2018 when the FIFO method was employed. Financial Position as of 12/31/16 12/31/17 12/31/18 Cash $ 91,300 $132,000 $152,600 Accounts receivable 81,100 101,700 123,000 Inventory 123,000 139,300 178,000 Other assets 158,300 173,400 201,900 Total assets $453,700 $546,400 $655,500 Accounts payable $ 39,900 $ 61,000 $ 81,100 Other liabilities 69,800 81,600 113,500 Common stock 201,900 201,900 201,900 Retained earnings 142,100 201,900 259,000 Total liabilities and equity $453,700 $546,400 $655,500 Income for Years Ended 12/31/17 12/31/18 Sales revenue $906,000 $1,375,600 Less: Cost of goods sold 500,000 750,900 Other expenses 207,700 302,000 707,700 1,052,900 Income before income taxes 198,300 322,700 Income taxes (40%) 79,320 129,080 Net income $118,980 $ 193,620 Other data: 1. Inventory on hand at December 31, 2016, consisted of 41,000 units valued at $3 each. 2. Sales (all units sold at the same price in a given year): 2017-151,000 units @ $6 each 2018-181,000 units @ $7.60 each 3. Purchases (all units purchased at the same price in given year): 2017-151,000 units @ $3.50 each 2018-181,000 units @ $4.40 each 4. Income taxes at the effective rate of 40% are paid on December 31 each year. Name the account(s) presented in the financial statements that would have different amounts for 2018 if LIFO rather than FIFO had been used, and state the new amount for each account that is named.

The management of Jones Company has asked its accounting department to describe the effect upon the company’s financial position and its income statements of accounting for inventories on the LIFO rather than the FIFO basis during 2017 and 2018. The accounting department is to assume that the change to LIFO would have been effective on January 1, 2017, and that the initial LIFO base would have been the inventory value on December 31, 2016. The following are the company’s financial statements and other data for the years 2017 and 2018 when the FIFO method was employed. Financial Position as of 12/31/16 12/31/17 12/31/18 Cash $ 91,300 $132,000 $152,600 Accounts receivable 81,100 101,700 123,000 Inventory 123,000 139,300 178,000 Other assets 158,300 173,400 201,900 Total assets $453,700 $546,400 $655,500 Accounts payable $ 39,900 $ 61,000 $ 81,100 Other liabilities 69,800 81,600 113,500 Common stock 201,900 201,900 201,900 Retained earnings 142,100 201,900 259,000 Total liabilities and equity $453,700 $546,400 $655,500 Income for Years Ended 12/31/17 12/31/18 Sales revenue $906,000 $1,375,600 Less: Cost of goods sold 500,000 750,900 Other expenses 207,700 302,000 707,700 1,052,900 Income before income taxes 198,300 322,700 Income taxes (40%) 79,320 129,080 Net income $118,980 $ 193,620 Other data: 1. Inventory on hand at December 31, 2016, consisted of 41,000 units valued at $3 each. 2. Sales (all units sold at the same price in a given year): 2017-151,000 units @ $6 each 2018-181,000 units @ $7.60 each 3. Purchases (all units purchased at the same price in given year): 2017-151,000 units @ $3.50 each 2018-181,000 units @ $4.40 each 4. Income taxes at the effective rate of 40% are paid on December 31 each year. Name the account(s) presented in the financial statements that would have different amounts for 2018 if LIFO rather than FIFO had been used, and state the new amount for each account that is named.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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	Financial Position as of
	12/31/16	12/31/17	12/31/18
Cash	$ 91,300	$132,000	$152,600
Accounts receivable	81,100	101,700	123,000
Inventory	123,000	139,300	178,000
Other assets	158,300	173,400	201,900
Total assets	$453,700	$546,400	$655,500
Accounts payable	$ 39,900	$ 61,000	$ 81,100
Other liabilities	69,800	81,600	113,500
Common stock	201,900	201,900	201,900
Retained earnings	142,100	201,900	259,000
Total liabilities and equity	$453,700	$546,400	$655,500

			Income for Years Ended
			12/31/17		12/31/18
Sales revenue		$906,000		$1,375,600
Less:	Cost of goods sold		500,000		750,900
	Other expenses		207,700		302,000
			707,700		1,052,900
Income before income taxes		198,300		322,700
	Income taxes (40%)		79,320		129,080
Net income		$118,980		$ 193,620

Other data:
1. Inventory on hand at December 31, 2016, consisted of 41,000 units valued at $3 each.

2. Sales (all units sold at the same price in a given year):

2017-151,000 units @ $6 each 2018-181,000 units @ $7.60 each

3. Purchases (all units purchased at the same price in given year):

2017-151,000 units @ $3.50 each 2018-181,000 units @ $4.40 each

4. Income taxes at the effective rate of 40% are paid on December 31 each year.

Name the account(s) presented in the financial statements that would have different amounts for 2018 if LIFO rather than FIFO had been used, and state the new amount for each account that is named.

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