FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Aquatic Equipment Corporation decided to switch from the LIFO method of costing inventories to the FIFO
method at the beginning of 2018. The inventory as reported at the end of 2017 using LIFO would have been
$60,000 higher using FIFO.
method). The tax rate is 40%.
Required:
1. Calculate the balance in retained earnings at the time of the change (beginning of 2018) as it would have been
reported if FIFO had been used in prior years.
2. Prepare the
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- In March 2015, XYZ Corp. purchased an item of inventory for $30. By June, that item could be purchased for $26 and re-sold for $31. XYZ's normal profit for the item is $4. At what amount should XYZ report the item in its June 30 balance sheet? XYZ uses the LIFO inventory cost flow assumption. (omit , and $ in the answer) 30arrow_forwardOn January 1, 2023 , Linda Corp. changed from the average cost to the dollar value LIFO method for accounting for inventory. The change results in a decrease in ending inventory of $45,497,000 for the year. How should the effect of this change be reported by Linda Corp. in 2023? (RE& CF 1) As an increase to beginning RE of $ 45,497,000 As a decrease to beginning RE of $45,497,000 As an increase to net income of $45,497,000 As a decrease to net income of $45,497,000arrow_forwardAquatic Equipment Corporation decided to switch from the LIFO method of costing inventories to the FIFO method at the beginning 2021. The inventory as reported at the end of 2020 using LIFO would have been $66.000 higher using FIFO. Retained earnings at th end of 2020 was reported as $840,000 (reflecting the LIFO method). The tax rate is 40%. Required: 1. Calculate the balance in retained earnings at the time of the change (beginning of 2021) as it would have been reported if FIFO had been used in prior years. 2. Prepare the journal entry at the beginning of 2021 to record the change in accounting principle. Complete this question by entering your answers in the tabs below.arrow_forward
- On January 1, 2020, Crow Company changed from FIFO to LIFO for income tax and external reporting purpos- es. On that same date, the beginning FIFO inventory (the base inventory for LIFO purposes) was $95,000. The following information is available from Crow's records for years 2020 through 2023. Year 2020 2021 2022 2023 Ending Inventory on a FIFO Basis Ending Inventory at Base Year Costs $113,600 84,600 85,200 92,900 a. $125,000 110,000 115,000 130,000 Required Compute the price indices used to calculate ending inventory at base year costs. Round to two decimals. Hint: Divide ending inventory on a FIFO basis by ending inventory at base year for each year. b. Compute the ending inventory on a dollar-value LIFO basis for each year, 2020 through 2023. Prepare the journal entry at each year-end, 2020 through 2023, to adjust inventory to LIFO.arrow_forward6. On January 1, 2011, Folk Company changed from the average cost method to the FIFO method to account for its inventory. Ending inventory for each method was given below. Folk Company accrues tax expense on December 31 of each year and pays the tax in April of the following year. The income tax rate is 30%. What is the net income to be reported in 2011 after the change to the FIFO inventory method? a. 1,610,000 b. 2,300,000 c. 1,750,000 d. 1,890,000arrow_forwardSwifty Enterprises reported cost of goods sold for 2025 of $1,453, 700 and retained earnings of $5,392, 600 at December 31, 2025. Swifty later discovered that its ending inventories at December 31, 2024 and 2025, were overstated by $102, 820 and $37,880, respectively. Determine the corrected amounts for 2025 cost of goods sold and December 31, 2025, retained earnings. Corrected cost of goods sold $enter a dollar amount Corrected 12/31/25 retained earnings $enter a dollar amountarrow_forward
- Blue Devil Inc. uses the LIFO inventory costing method for both tax reporting and financial reporting purposes. Blue Devil’s inventories are reported at $50 million on its balance sheet. In its footnotes, Blue Devil is required to report the amount at which inventories would have been reported under FIFO method. The difference between these two numbers is referred to as what? Group of answer choices LIFO holding gain LCM disclosures LIFO reserve LIFO liquidationarrow_forwardpiotua incone as of year-end 2015? Explain. Assume GE has a 35% income tax rate. As of the 2015 year-end, how much has GE saved in by choosing LIFO over FIFO method for costing inventory? Has the use of LIFO i creased GE's cumulative taxes paid? d increased or de e. What effect has the use of LIFO inventory costing had on GE's pretax income and tax expense 2015 only (assume a 35% income tax rate)? E6-25) Computing Cost of Sales and Ending Inventory Howell Company has the following financial records for the current period. Units Unit Cost Beginning inventory . .. 150 $100 96 92 90 #2 500 Ending inventory is 350 units. Compute the ending inventory and the cost of goods sold for the current period using (a) first-in, first-out, (b) average cost, and (c) last-in, first-out. Analyzing an Inventory Footnote Disclosure The inventory footnote from Deere & Company's 2015 10-K follows. E6-26. Inventories Most inventories owned by Deere& Company and its U.S equipment subsidiar- es are valued at…arrow_forwardDuring 2017, Windsor Inc. changed from LIFO to FIFO inventory pricing. Windsor began operations in 2015 and its pretax income in 2016 and 2015 under LIFO was $610,000 and $706,000, respectively. Pretax income using FIFO pricing in the prior years would have been $636,000 in 2015 and $762,000 in 2016. In 2017, Windsor reported pretax income using FIFO pricing of $731,000. Show comparative income statements for Windsor beginning with “Income before income tax,” as presented in the 2017 income statement. The tax rate for all years is 30%. 2017 2016 2015 Income before income tax $enter a dollar amount $enter a dollar amount $enter a dollar amount Income tax enter a dollar amount enter a dollar amount enter a dollar amount Net Income $enter a total amount $enter a total amountarrow_forward
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