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. 1,890,000
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. 1,890,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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6. 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. 1,890,000
Transcribed Image Text:2010
2011
Average cost
500,000
900,000
FIFO cost
700,000
1,400,000
The income statement information calculated by the average cost method was as follows:
2010
2011
Sales
10,000,000
13,000,000
Cost of goods sold
7,000,000
9,000,000
Operating expenses
1,500,000
2,000,000
Tax expense
450,000
600,000
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