9th Edition

ISBN: 9781260679694

Author: SPICELAND

Publisher: MCG

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The transaction analysis is done with the help of the accounting equation. The basic accounting equation is alternatively known as the balance sheet equation is based on the double-entry system which says that for each transaction happening in a business…

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Textbook Question

Chapter 20, Problem 20.7E

Change in principle; change in inventory cost method

• LO20–2

Millington Materials is a leading supplier of building equipment, building products, materials and timber for sale, with over 200 branches across the Mid-South. On January 1, 2018, management decided to change from the average inventory costing method to the FIFO inventory costing method at each of its outlets. The following table presents information concerning the change. The income tax rate for all years is 40%.

Chapter 20, Problem 20.7E, Change in principle; change in inventory cost method LO202 Millington Materials is a leading

Required:

1. Prepare the journal entry to record the change in accounting principle.

2. Determine the net income to be reported in the 2018–2017 comparative income statements.

3. Which other 2017 amounts would be reported differently in the 2018–2017 comparative income statements and 2018–2017 comparative balance sheets than they were reported the previous year?

4. How would the change be reflected in the 2018–2017 comparative statements of shareholders’ equity? Cash dividends were $1 million each year. Assume no dividends were paid prior to 2017.

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Chapter 20, Problem 20.6E

Chapter 20, Problem 20.8E

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Chapter 20 Solutions

INTERMEDIATE ACCOUNTING (LL) W/CONNECT

Ch. 20 - Prob. 20.1Q Ch. 20 - There are three basic accounting approaches to...Ch. 20 - Prob. 20.3Q Ch. 20 - Lynch Corporation changes from the...Ch. 20 - Sugarbaker Designs Inc. changed from the FIFO...Ch. 20 - Most changes in accounting principles are recorded...Ch. 20 - Southeast Steel, Inc., changed from the FIFO...Ch. 20 - Prob. 20.8Q Ch. 20 - Its not easy sometimes to distinguish between a...Ch. 20 - For financial reporting, a reporting entity can be...

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Solution Summary: The author explains that accounting principles are the rules and guidelines that the companies should follow at the time of reporting financial statement.

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