Toolum Corporation began operations on January 1, 2020, and uses the average- cost method of pricing inventory. Management is contemplating a change in inventory methods for 2023. The following information is available for the years 2020-2022 2020 2021 2022 Net Income using Average Cost Method 20,000 15.000 25.000 FIFO Method 22,000 20,000 30,000 (Ignore all tax effects.) a. Prepare the journal entry necessary to record a change from the average-cost method to the FIFO method in 2023. Show all workings b. Determine net income to be reported for 2020, 2021 and 2022, after givina effect to the change in accounting policy.

Toolum Corporation began operations on January 1, 2020, and uses the average- cost method of pricing inventory. Management is contemplating a change in inventory methods for 2023. The following information is available for the years 2020-2022 2020 2021 2022 Net Income using Average Cost Method 20,000 15.000 25.000 FIFO Method 22,000 20,000 30,000 (Ignore all tax effects.) a. Prepare the journal entry necessary to record a change from the average-cost method to the FIFO method in 2023. Show all workings b. Determine net income to be reported for 2020, 2021 and 2022, after givina effect to the change in accounting policy.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Richardson's Flower Depot uses FIFO for internal reporting purposes and LIFO for financial

A: the steps for converting from FIFO to LIFO will vary depending on the specific business and…

Q: Tim Mattke Company began operations in 2018 and for simplicity reasons, adopted weighted-average…

A: a.

Q: In 2024, the Barton and Barton Company changed its method of valuing inventory from the FIFO method…

A: An adjustment entry, also known as an adjusting journal entry, is a type of accounting entry made at…

Q: In 2022, Maria Corporation changed its method of inventory pricing from LIFO to FIFO. Net income…

A: FIFO is the method for valuation of inventory under which ending inventory is valued on the basis of…

Q: 3. & 4. Determine the balance in retained earnings at January 1, 2020 as Fieri reported using FIFO…

A: Solution:- Given, Revenue = $390 mil Cost of goods sold FIFO = $39 mil ; Average = $54 mil…

Q: At the begining of 2020, Flynne Company decided to change from the LIFO to the FIFO inventory cost…

A: Comment- Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the…

Q: The management of Knight Company has asked its accounting department to describe the effect upon the…

A: It is the stock held for sale to customers. The inventory comprises of raw materials, work in…

Q: During 2019 (its first year of operations) and 2020, Fieri Foods used the FIFO inventory costing…

A: It is a financial statement that shows the company's profit or loss over a period of time. It is…

Q: Oriole Industries had the following inventory transactions occur during 2020: Units Cost/unit $41…

A: FIFO Method :— It is one of the method of inventory valuation in which it is assumed that old…

Q: 2023 2024 2025 Net Income Computed Using Average-Cost Method FIFO Method $15,900 $19,170 17,880…

A: The first in first out method is one of the important methods of valuing inventory in which the…

Q: Taylor Company uses a periodic inventory system. The following is partial information from its…

A: The missing values are calculated using the accounting formulas. Sometimes single-entry books are…

Q: During 2019 (its first year of operations) and 2020, Flerl Foods used the FIFO Inventory costing…

A: Retained earnings shows the income income of the company which the company has accumulated over a…

Q: In 2021, Wade Window and Glass changed its inventory method from FIFO to LIFO. Inventory at the end…

A: FIFO: In the First-in-First-Out method, items purchased initially are sold first. So, the value of…

Q: Carl Co. began operations in 2021. At the beginning of fiscal year 2023, Carl Co. decided to change…

A: The objective of the question is to determine the correct journal entry to record the change in…

Q: Pierce Ltd. (Pierce) decided to change the costing method for its inventory at its December 31,…

A: Inventories are valued as per the accounting and valuation method followed by the company. There are…

Q: Pyramid issued 50,000 $1 par, common shares for $230,000 when the business began, and there have…

A: A journal is made to record all business transactions. All the financial transactions are recorded…

Q: In 2020, Bevins Company decided to change from LIFO to FIFO due to better representation of the flow…

A: GIVEN In 2020, Bevins Company decided to change from LIFO to FIFO due to better representation…

Q: Wildhorse Company uses the LCM method, on an individual-item basis, in pricing its inventory Items…

A: Answer to Question:- Determination of Unit value of Inventory…

Q: Cabinets for Less uses FIFO for internal reporting purposes and LIFO for financial and income tax…

A: The steps for converting from FIFO to LIFO will vary depending on the specific business and…

Q: Fog Gear Incorporated changed from LIFO to the FIFO inventory costin January 1, 2024. Inventory…

A: Introduction:- Journal entry is the first stage of accounting process. Journal entry used to record…

Q: Required: Ignoring income tax considerations, prepare the entry to report this accounting change.…

A: LIFO is an inventory valuation method under which inventories which are purchased in last will be…

Q: Nutritional Foods reports merchandise inventory at the lower-of-cost-or-market. Prior to releasing…

A: INVENTORY VALUATIONInventory Valuation is a Method of Calculation of Value of Inventory at the End…

Q: Metlock Company began operations in 2019 and determined its ending inventory at cost and at…

A: ACCOUNTING STANDARDS - 2 Objective of this standard is to formulate the method of computation of…

Q: ease help me with section 3 and 4 During 2019 (its first year of operations) and 2020, Fieri Foods…

A: Retained earnings are the portion of the net income of an organization that is not paid out as…

Question

Toolum Corporation began operations on January 1, 2020, and uses the average-
cost method of pricing inventory. Management is contemplating a change in
inventory methods for 2023. The following information is available for the years
2020-2022
2020
2021
2022
Net Income using
Average Cost Method
20,000
15.000
25,000
FIFO Method
22,000
20,000
30,000
(Ignore all tax effects.)
a. Prepare the journal entry necessary to record a change from the average-cost
method to the FIFO method in 2023. Show all workings
b. Determine net income to be reported for 2020, 2021 and 2022, after giving
effect to the change in accounting policy.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Define Inventory

VIEW

Step 2: Calculate the effect of change in method from Average cost to FIFO method

VIEW

Step 3: Part a. Prepare journal entries

VIEW

Step 4: Part b. Compute Net Income - FIFO Method

VIEW

Solution

VIEW

Step by step

Solved in 5 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Please do not give solution in image format thanku
Blossom Company began operations in 2023 and for simplicity reasons, adopted weighted-average pricing for inventory. In 2025, in accordance with other companies in its industry, Blossom changed its inventory pricing to FIFO. The pretax income data is reported below. Year 2023 2024 2025 (a) Weighted-Average $382,100 398,700 421,100 * Your answer is incorrect. FIFO Net income $ $398,800 426,900 466,900 What is Blossom's net income in 2025? Assume a 35% tax rate in all years. 31390 Compute the cumulative effect of the change in accounting principle from weighted-average to FIFO inventory pricing. Net effect $ eTextbook and Media Show comparative income statements for Kingbird Company, beginning with income before income tax, as presented on the 2020 income statement. Income before income tax SU Income tax Net income $ $ 2020 $ $ 2019 $ $ 2018
Cabinets for Less uses FIFO for internal reporting purposes and LIFO for financial and income tax purposes. At the end of 2020, the following information was obtained from the inventory records: 2019 2020 Ending inventory, FIFO $78,650 $93,250 Ending inventory, LIFO 68,500 78,350 Required: Prepare the necessary entry to convert to LIFO at the end of 2020.
i need the answer quickly
Vikram bhai
During 2019 (its first year of operations) and 2020, Fieri Foods used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2021, Fieri decided to change to the average method for both financial reporting and tax purposes. Income components before income tax for 2019, 2020, and 2021 were as follows: ($ in millions) Revenues Cost of goods sold (FIFO) Cost of goods sold (average) Operating expenses 2019 2020 $ 520 $ 510 (51) (78) (294) 2021 $ 550 (53) (82) (302) (306) (59) (88) Dividends of $32 million were paid each year. Fieri's fiscal year ends December 31. Required: 1. Prepare the journal entry at the beginning of 2021 to record the change in accounting principle. (Ignore income taxes.) 2. Prepare the 2021-2020 comparative income statements. 3. & 4. Determine the balance in retained earnings at January 1, 2020 as Fieri reported using FIFO method and determine the adjustment of balance in retained earnings as on January 1, 2020 using…
please help and show formula
On January 1, 2020, Crow Company changed from FIFO to LIFO for income tax and external reporting purpos- es. On that same date, the beginning FIFO inventory (the base inventory for LIFO purposes) was $95,000. The following information is available from Crow's records for years 2020 through 2023. Year 2020 2021 2022 2023 Ending Inventory on a FIFO Basis Ending Inventory at Base Year Costs $113,600 84,600 85,200 92,900 a. $125,000 110,000 115,000 130,000 Required Compute the price indices used to calculate ending inventory at base year costs. Round to two decimals. Hint: Divide ending inventory on a FIFO basis by ending inventory at base year for each year. b. Compute the ending inventory on a dollar-value LIFO basis for each year, 2020 through 2023. Prepare the journal entry at each year-end, 2020 through 2023, to adjust inventory to LIFO.
On January 1, 2019, Lexor Company adopted the dollar-value-LIFO method of inventory costing. Lexor's ending inventory records appear as follows: Year Current cost Index 2019 $ 42,000 100 (1.00) 2020 58,000 110 (1.10) 2021 60,100 120 (1.20) 2022 68,200 130 (1.30) Compute the ending inventory for the years 2019, 2020, 2021, and 2022, using the dollar-value LIFO method. Round to the nearest dollar. Show all work. You can use the previous homework template that you used for