Chapter 21, Problem 21.1P

a.

To determine

FIFO:

It stands for first in first out. It is an inventory valuation method in which the firm accepts that the first goods bought are also the first good sold. This method calculates the value of closing inventory at the end of an accounting period.

The cumulative effect net of tax for the 3 years needed to record a change from FIFO to average cost method.

b.

To determine

FIFO:

It stands for first in first out. It is an inventory valuation method in which the firm accept that the first goods bought are also the first good sold. This method calculates the value of closing inventory at the end of an accounting period.

To prepare: The journal entry to record the changes in accounting for inventory valuation.

c.

To determine

FIFO:

It stands for first in first out. It is an inventory valuation method in which the firm accepts that the first goods bought are also the first good sold. This method calculates the value of closing inventory at the end of an accounting period.

Where STP should report the net of tax cumulative effect, assuming that the first balance sheet presented is for the year ended 31 December 2023.

d.

To determine

Indicate the COGS reported on the income statement for 2021, 2022, 2023, and 2024.

e.

To determine

Indicate the COGS reported on the income statement for 2021, 2022, 2023, and 2024 assuming that changes in principle are considered to be impractical.