Change in Accounting Principle, Inventory. Second Thought Products (STP) began operations on January 1, 2017, and adopted the FIFO method of
Cost of Goods Sold Under | ||
Year | Average Cost Method | FIFO Method |
2017 2018 2019 2020 |
$176,400 117,600 252,000 285,600 |
$201,600 134,400 277,200 260,400 |
Required
- a. Compute the cumulative effect net of tax for the 3-year period needed to record a change from the FIFO method to the average-cost method.
- b. Prepare the
journal entry to record the change in accounting for inventory valuation - c. Indicate where STP should report the net of tax cumulative effect, assuming that the first
balance sheet presented is for the year ended December 31, 2019. - d. Indicate the cost of goods sold reported on the income statement for 2017, 2018, 2019, and 2020
- e. Assume that this change in principle is considered to be impractical Indicate the cost of goods on the income statement for 2017, 2018, 2019, and 2020.
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