Chapter 20, Problem 20.7E

(1)

To determine

Accounting principle:

Accounting principles are the rules and guidelines that the companies should follow at the time of reporting financial statement.

Inventory valuation methods:

Inventory valuation methods are used to provide a monetary value for the inventory of a company. LIFO (Last-In-First-Out), FIFO (First-In-First-Out), and Weighted Average methods are the examples of the inventory valuation methods.

To prepare: A journal entry for change in the inventory of valuation method of M Materials.

(2)

To determine

The amount of net income that should be reported in 2018-2017 comparative income statements.

(3)

To determine

To identify: The amounts that would be reported differently in the 2016-2015 comparative income statement and balance sheet than they were actually in the previous year.

(4)

To determine

To explain: The changes reflected in the 2016-2015 comparative statement of shareholders’ equity