Aquatic Equipment Corporation decided to switch from the LIFO method of costing inventories to the FIFO method at the beginning of 2021. The inventory as reported at the end of 2020 using LIFO would have been $60,000 higher using FIFO. Retained earnings at the end of 2020 was reported as $780,000 (reflecting the LIFO method). The tax rate is 25%.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.
Aquatic Equipment Corporation decided to switch from the LIFO method of costing inventories to the FIFO method at the beginning of 2021. The inventory as reported at the end of 2020 using LIFO would have been $60,000 higher using FIFO. Retained earnings at the end of 2020 was reported as $780,000 (reflecting the LIFO method). The tax rate is 25%.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.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 6E: Berg Company began operations on January 1, 2019, and uses the FIFO method in costing its raw...
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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 2021. The inventory as reported at the end of 2020 using LIFO would have been $60,000 higher using FIFO.
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
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