INTERM.ACCT.:REPORTING...-CENGAGENOWV2
3rd Edition
ISBN: 9781337909358
Author: WAHLEN
Publisher: CENGAGE L
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Chapter 22, Problem 6E
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?
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In 2020, Frost Company, which began operations in 2018, decided to change from LIFO to FIFO because management believed that FIFO better represented the flow of their inventory. Management prepared the following analysis showing the effect of this change:
1. Prepare the journal entry necessary to record the change. 2. whhat amount of net income would Frost report in 2018, 2019, and 2020? 3. If Frost’s 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?
The management of Tritt Company has asked its accounting department to describe the effect upon the company's financial position and its income statements of accounting for inventories on the LIFO rather than the FIFO basis during 2020 and 2021. The accounting department is to assume that the change to LIFO would have been effective on January 1, 2020, and that the initial LIFO base would have been the inventory value on December 31, 2019. The following are the company's financial statements and other data for the years 2020 and 2021 when the FIFO method was employed.
Financial Position as of
12/31/19
12/31/20
12/31/21
Cash
$ 90,000
$130,000
$154,000
Accounts receivable
80,000
100,000
120,000
Inventory
120,000
140,000
176,000
Other assets
160,000
170,000
200,000
Total assets
$450,000
$540,000
$650,000
Accounts payable
$ 40,000
$ 60,000
$ 80,000
Other liabilities
70,000
80,000
110,000
Common stock
200,000
200,000
200,000
Retained earnings…
Southeast Steel, Inc., changed from the FIFO inventory costing method to the LIFO method during 2020. How would this change likely be reported in the 2021 comparative financial statements?
Chapter 22 Solutions
INTERM.ACCT.:REPORTING...-CENGAGENOWV2
Ch. 22 - Prob. 1GICh. 22 - Prob. 2GICh. 22 - Prob. 3GICh. 22 - What steps are necessary to apply the...Ch. 22 - Prob. 5GICh. 22 - Prob. 6GICh. 22 - Prob. 7GICh. 22 - Prob. 8GICh. 22 - Define a change in estimate. What is the proper...Ch. 22 - Prob. 10GI
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