What amount should be reflected as the effect of change in accounting estimate in the statement of changes in equity for 2020? * 350,000 increase 490,000 decrease 490,000 increase None
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What amount should be reflected as the effect of change in accounting estimate in the statement of changes in equity for 2020? *
350,000 increase
490,000 decrease
490,000 increase
None
![During 2020, an entity decided to change from FIFO method of inventory valuation to
the weighted average method. Inventory balances under each method were:
FIFO
December 31, 2017
December 31, 2018
December 31, 2019
4,500,000
7,800,000
8,300,000
Weighted Average
5,400,000
7,100,000
7,800,000
The income tax rate is 30%. No other accounting changes was implemented for the
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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.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.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.
- 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.During 2020, an entity decided to change from FIFO method of inventory valuation to the weighted average method. Inventory balances under each method were: Weighted Average 5,400,000 7,100,000 7,800,000 FIFO December 31, 2017 December 31, 2018 December 31, 2019 4,500,000 7,800,000 8,300,000 The income tax rate is 30%. No other accounting changes was implemented for the year. What amount should be reflected as the effect of change in accounting estimate in the statement of changes in equity for 2020?During 2021, Tricky Company decided to change from FIFO method of inventory valuation to the weighted average method. Inventory balances under each method were as follows: Weighted Average 1,540,000 1,660,000 FIFO January 1 December 31 1,420,000 1,580,000 Income tax rate is 35%. In its 2021 statement of retained earnings, what amount should Tricky report as the effect of this accounting change?
- Vaughn Co. decides at the beginning of 2020 to adopt the FIFO method of inventory valuation. Vaughn had used the LIFO method for financial reporting since its inception on January 1, 2018, and had maintained records adequate to apply the FIFO method retrospectively. Vaughn concluded that FIFO is the preferable inventory method because it reflects the current cost of inventory on the balance sheet. The following table presents the effects of the change in accounting principles on inventory and cost of goods sold. Income taxes are ignored. Inventory Determined by Cost of Goods Sold Determined by Date LIFO Method FIFO Method LIFO Method FIFO Method January 1, 2018 $ 0 $ 0 $ 0 $ 0 December 31, 2018 100 8 800 892 December 31, 2019 200 220 940 828 December 31, 2020 350 410 1,100 1,060 Retained earnings reported under LIFO are as follows. Retained Earnings Balance December 31, 2018 $1,060…During 2022, Emerald Inc. decided to change from FIFO method of inventory valuation to the weighted average method. January 1 inventory under FIFO 7,100,000 January 1 inventory under weighted average 7,700,000 December 31 inventory under FIFO 7,900,000 December 31inventory under weighted average 8,300,000 In the statement of retained earnings for 2022, what amount should be reported as the pretax cumulative effect of this accounting change? (A) 1,000,000 deduction (B) 1,000,000 addition C 600,000 deduction D 600,000 additionTaveras Co. decides at the beginning of 2020 to adopt the FIFO method of inventory valuation. Taveras had used the LIFO method for financial reporting since its inception on January 1, 2018, and had maintained records adequate to apply the FIFO method retrospectively. Taveras concluded that FIFO is the preferable inventory method because it reflects the current cost of inventory on the balance sheet. The following table presents the effects of the change in accounting principles on inventory and cost of goods sold. Inventory Determined by Cost of Goods Sold Determined by Date LIFO Method FIFO Method LIFO Method FIFO Method January 1, 2018 $ 0 $ 0 $ 0 $ 0 December 31, 2018 100 80 800 820 December 31, 2019 200 240 1,000 940 December 31, 2020 320 390 1,130 1,100 Other information: 1. For each year presented, sales are $3,000 and operating expenses are $1,000. 2.…
- During 2022, Bamboo Inc. decided to change from FIFO method of inventory valuation to the weighted average method. January 1 inventory under FIFO 7,100,000 January 1 inventory under weighted average 7,700,000 December 31 inventory under FIFO 7,900,000 December 31inventory under weighted average 8,300,000 In the statement of retained earnings for 2022, what amount should be reported as the pretax cumulative effect of this accounting change?A. 1,000,000 additionB. 1,000,000 deductionC. 600,000 additionD. 600,000 deductionFTC Company had used the FIFO method of inventory valuation since it began operations in 2016. The entity decided to change to the weighted average method for measuring inventory at the beginning of 2019. The income tax rate is 30%. The following schedule shows year-end inventory balances: Year FIFO Weighted Average 2016 P4,500,000 P5,400,000 2017 7,800,000 7,100,000 2018 8,300,000 7,800,000 What amount should be reported for 2019 as the cumulative effect of the change in accounting policy? (A P500,000 decrease in retained earnings B P350,000 increase in retained earnings (C P350,000 decrease in retained earnings D P500,000 increase in retained earningsOn December 31, 2021, an entity experienced a decline in the value of inventory resulting in a writedown from P4,000,000 cost to P3,500,000 net realizable value. The entity used the allowance method to record the necessary adjustment. In 2022, market conditions have improved dramatically. On December 31, 2022, the inventory had a cost of P5,000,000 and net realizable value of P4,800,000. The entity made purchases of P20,000,000 in 2022. What amount should be reported as cost of goods sold in 2022? * a. 19,000,000 O b. 19,300,000 c. 18,700,000 O d. 24,000,000
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