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

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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 $93,250 Ending inventory, LIFO 68,500 78,350 Required: Prepare the necessary entry to convert to LIFO at the end of 2020.
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During 2019 (its first year of operations) and 2020, Fieri Foods used the FIFO inventory costing method for both financial reporting and tax purposes. At the beginning of 2021, Fieri decided to change to the average method for both financial reporting and tax purposes. Income components before income tax for 2019, 2020, and 2021 were as follows: ($ 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…
Ignoring income taxes, what is the total effect of the errors on 2021 net income? ( Leave the numerical figure positive, put a dash then identify if OVERSTATED or UNDERSTATED, example: 25000-OVERSTATED)
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3. How much is the cumulative effect of this change that should be reported in the income statement for the year ended December 31, 2021? On December 31, 2021, BLACK MAMBA Company appropriately changed its inventory valuation method to average cost method from FIFO for financial statement and income tax purposes. The change will result in a $180,000 increase in the beginning inventory at January 1, 2021. Assume an income tax rate of 30%. Your answer
How much is the cumulative effect of this change that should be reported in the income statement for the year ended December 31, 2021?
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