Tim Mattke Company began operations in 2018 and for simplicity reasons, adopted weighted-average pricing for inventory. In 2020, in accordance with other companies in its industry, Mattke changed its inventory pricing to FIFO. The pretax income data is reported below. Year Weighted-Average FIFO 2018 $370,000 $395,000 2019 390,000 430,000 2020 410,000 450,000 Instructions a. What is Mattke’s net income in 2020? Assume a 20% tax rate in all years. b. Compute the cumulative effect of the change in accounting principle from weighted-average to FIFO inventory pricing. c. Show comparative income statements for Tim Mattke Company, beginning with income before income tax, as presented on the 2020 income statement.
Tim Mattke Company began operations in 2018 and for simplicity reasons, adopted weighted-average pricing for inventory. In 2020, in accordance with other companies in its industry, Mattke changed its inventory pricing to FIFO. The pretax income data is reported below. Year Weighted-Average FIFO 2018 $370,000 $395,000 2019 390,000 430,000 2020 410,000 450,000 Instructions a. What is Mattke’s net income in 2020? Assume a 20% tax rate in all years. b. Compute the cumulative effect of the change in accounting principle from weighted-average to FIFO inventory pricing. c. Show comparative income statements for Tim Mattke Company, beginning with income before income tax, as presented on the 2020 income statement.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Tim Mattke Company began operations in 2018 and for simplicity reasons, adopted weighted-average pricing for inventory. In 2020, in accordance with other companies in its industry, Mattke changed its inventory pricing to FIFO. The pretax income data is reported below.
| Year | Weighted-Average | FIFO | ||
| 2018 | $370,000 | $395,000 | ||
| 2019 | 390,000 | 430,000 | ||
| 2020 | 410,000 | 450,000 |
Instructions
a. What is Mattke’s net income in 2020? Assume a 20% tax rate in all years.
b. Compute the cumulative effect of the change in accounting principle from weighted-average to FIFO inventory pricing.
c. Show comparative income statements for Tim Mattke Company, beginning with income before income tax, as presented on the 2020 income statement.
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