Webster Products, Inc., adopted the dollar-value LIFO method of determining inventory costs for financial and income tax reporting on January 1, 2021. Webster continues to use the FIFO method for internal decision-making purposes. Webster's FIFO inventories at December 31, 2021, 2022, and 2023, were $300,000, $412,500, and $585,000, respectively. Internally generated cost indexes are used to convert FIFO inventory amounts to dollar-value LIFO amounts. Webster estimated these indexes as follows: 1. 2021 2022 2023 Required: 1. Determine Webster's dollar-value LIFO inventory at December 31, 2022 and 2023. 2. Will Webster account for the change (a) retrospectively or (b) prospectively? 2. 1.00 1.25 1.50 LIFO inventory at 2022 LIFO inventory at 2023 Webster account for the change

Webster Products, Inc., adopted the dollar-value LIFO method of determining inventory costs for financial and income tax reporting on January 1, 2021. Webster continues to use the FIFO method for internal decision-making purposes. Webster's FIFO inventories at December 31, 2021, 2022, and 2023, were $300,000, $412,500, and $585,000, respectively. Internally generated cost indexes are used to convert FIFO inventory amounts to dollar-value LIFO amounts. Webster estimated these indexes as follows: 1. 2021 2022 2023 Required: 1. Determine Webster's dollar-value LIFO inventory at December 31, 2022 and 2023. 2. Will Webster account for the change (a) retrospectively or (b) prospectively? 2. 1.00 1.25 1.50 LIFO inventory at 2022 LIFO inventory at 2023 Webster account for the change

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter7: Inventories: Cost Measurement And Flow Assumptions

Section: Chapter Questions

Problem 11P: Olson Company adopted the dollar-value LIFO method for inventory valuation at the beginning of 2015....

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Schmidt Company began operations on January 1, 2018, and used the LIFO inventory method for both financial reporting and income taxes. However, at the beginning of 2020, Schmidt decided to switch to the average cost inventory method for financial and income tax reporting. It had previously reported the following financial statement information for 2019: An analysis of the accounting records discloses the following cost of goods sold under the LIFO and average cost inventory methods: There are no indirect effects of the change in inventory method. Revenues for 2020 total 130,000; operating expenses for 2020 total 30,000. Schmidt is subject to a 21% income tax rate in all years; it pays all income taxes payable in the next quarter. Assume that any deferred tax liability was paid in the subsequent year. Schmidt had 10,000 shares of common stock outstanding during all years; it paid dividends of 1 per share in 2020. At the end of 2020, Schmidt had cash of 15,600, inventory of 34,000, other assets of 76,000, income taxes payable of 4,200, and accounts payable of 3,000. It desires to show financial statements for the current year and previous year in its 2020 annual report. Required: 1. Prepare the journal entry to reflect the change in method at the beginning of 2020. Show supporting calculations. 2. Prepare the 2020 financial statements. Notes to the financial statements are not necessary. Show supporting calculations.
Berg Company began operations on January 1, 2019, and uses the FIFO method in costing its raw materials inventory. During 2020, management is contemplating a change to the LIFO method and is interested in determining what effect such a change will have on net income. Accordingly, the following information has been developed: Required: What is the effect on income before income taxes in 2020 of a change to the LIFO method?
Refer to the information provided in RE8-4. If Paul Corporations inventory at January 1, 2019, had a cost and net realizable value of 300,000, prepare the journal entry to record the reductions to NRV for Paul Corporation assuming that Paul uses a periodic inventory system and the direct method. Paul Corporation uses FIFO and reports the following inventory information: Assuming Paul uses a perpetual inventory system and the direct method, prepare the journal entry to record the write-down of inventory.
Refer to the information provided in RE8-4. If Paul Corporations inventory at January 1, 2019, had a cost and net realizable value of 300,000, prepare the journal entry to record the reductions to NRV for Paul Corporation assuming that Paul uses a periodic inventory system and the allowance method. Paul Corporation uses FIFO and reports the following inventory information: Assuming Paul uses a perpetual inventory system and the direct method, prepare the journal entry to record the write-down of inventory.
Heller Company began operations in 2019 and used the LIFO method to compute its 300,000 cost of goods sold for that year. At the beginning of 2020, Heller changed to the FIFO method. Heller determined that its cost of goods sold under FIFO would have been 250,000 in 2019. For 2020, Hellers cost of goods sold under FIFO was 360,000, while it would have been 410,000 under LIFO. Heller is subject to a 21% income tax rate. Compute the cumulative effect of the retrospective adjustment on prior years income (net of taxes) that Heller would report on its retained earnings statement for 2020.
Koopman Company began operations on January 1, 2018, and uses they FIFO inventory method for financial reporting and the average cost inventory method for income taxes. At the beginning of 2020, Koopman decided to switch to the average cost inventory method for financial reporting. It had previously reported the following financial statement information for 2019: An analysis of the accounting records discloses the following cost of goods sold under the FIFO and average cost inventory methods: There are no indirect effects of the change in inventory method. Revenues for 2020 total 130,000; operating expenses for 2020 total 30,000. Koopman is subject to a 21% income tax rate in all years; it pays the income taxes payable of a current year in the first quarter of the next year. Koopman had 10,000 shares of common stock outstanding during all years; it paid dividends of 1 per share in 2020. At the end of 2020, Koopman had cash of 10,000, inventory of 24,000, other assets of 70,800, accounts payable of 4,500, and income taxes payable of 6,000. It desires to show financial statements for the current year and previous year in its 2020 annual report. Required: 1. Prepare the journal entry to reflect the change in methods at the beginning of 2020. Show supporting calculations. 2. Prepare the 2020 financial statements. Notes to the financial statements are not necessary. Show supporting calculations.
Olson Company adopted the dollar-value LIFO method for inventory valuation at the beginning of 2015. The following information about the inventory at the end of each year is available from Olsons records: Required: 1. Calculate the dollar-value LIFO inventory at the end of each year. 2. Prepare the appropriate disclosures for the 2021 annual report if Olson uses current cost internally and LIFO for financial reporting.
In 2020, Frost Company, which began operations in 2018, decided to change from LIFO to FIFO because management believed that FIFO belter represented the flow of their inventory. Management prepared the following analysis showing the effect of this change: Frost reported net income of 2,500,000, 2,400,000, and 2,100,000 in 2018, 2019, and 2020, respectively. The tax rate is 21%. Required: 1. Prepare the journal entry necessary to record the change. 2. What amount of net income would Frost report in 2018, 2019, and 2020? 3. If Frosts employees received a bonus of 10% of income before deducting the bonus and income taxes in 2018 and 2019, what would be the effect on net income for 2018, 2019, and 2020?
Company Elmira reported the following cost of goods sold but later realized that an error had been made in ending inventory for year 2021. The correct inventory amount for 2021 was 32,000. Once the error is corrected, (a) how much is the restated cost of goods sold for 2021? and (b) how much is the restated cost of goods sold for 2022?
Webster Products, Inc., adopted the dollar-value LIFO method of determining inventory costs for financial andincome tax reporting on January 1, 2018. Webster continues to use the FIFO method for internal decision-makingpurposes. Webster’s FIFO inventories at December 31, 2018, 2019, and 2020, were $300,000, $412,500, and$585,000, respectively. Internally generated cost indexes are used to convert FIFO inventory amounts to dollar-value LIFO amounts. Webster estimated these indexes as follows:2018 1.002019 1.252020 1.50Required:1. Determine Webster’s dollar-value LIFO inventory at December 31, 2019 and 2020.2. Describe how the change should have been reported in Webster’s 2018 financial statements.
Webster Products, Inc., adopted the dollar-value LIFO method of determining inventory costs for financial and income tax reporting on January 1, 2016. Webster continues to use the FIFO method for internal decision-making purposes. Webster’s FIFO inventories at December 31, 2016, 2017, and 2018, were $300,000, $412,500, and $585,000, respectively. Internally generated cost indexes are used to convert FIFO inventory amounts to dollarvalue LIFO amounts. Webster estimated these indexes as follows: 2016 1.00 2017 1.25 2018 1.50 Required: 1. Determine Webster’s dollar-value LIFO inventory at December 31, 2017 and 2018. 2. Describe how the change should have been reported in Webster’s 2016 financial statements.
Toolum Corporation began operations on January 1, 2020, and uses the average-cost method of pricing inventory. Management is contemplating a change ininventory methods for 2023. The following information is available for the years2020–2022 Requirements:(Ignore all tax effects.)a. Prepare the journal entry necessary to record a change from the average-costmethod to the FIFO method in 2023. Show all workings b. Determine net income to be reported for 2020, 2021, and 2022, after givingeffect to the change in accounting policy.