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?
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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?
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- Fava Company began operations in 2018 and used the LIFO inventory method for both financial reporting and income taxes. At the beginning of 2019, the anticipated cost trends in the industry had changed, so that it adopted the FIFO method for both financial reporting and income taxes. Fava reported revenues of 300,000 and 270,000 in 2019 and 2018, respectively. Fava reported expenses (excluding income tax expense) of 125,000 and 120,000 in 2019 and 2018, which included cost of goods sold of 55,000 and 45,000, respectively. An analysis indicates that the FIFO cost of goods sold would have been lower by 8,000 in 2018. The tax rate is 21%. Fava has a simple capital structure with 15,000 shares of common stock outstanding during 2018 and 2019. It paid no dividends in either year. Required: 1. Prepare the journal entry to reflect the change. 2. At the end of 2019, prepare the comparative income statements for 2019 and 2018. Notes to the financial statements are not necessary. 3. At the end of 2019, prepare the comparative retained earnings statements for 2019 and 2018.Calculate the 2019 inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover. How does Computrons utilization of assets stack up against that of other firms in its industry?Sugarbaker Designs Inc. changed from the FIFO inventory costing method to the average cost method during 2021. Which items from the 2020 financial statements should be restated on the basis of the average cost method when reported in the 2021 comparative financial statements?
- 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 2017. Howwould this change likely be reported in the 2018 comparative financial statements?At the begining of 2020, Flynne Company decided to change from the LIFO to the FIFO inventory cost flow assumption. The following data are available: 1. Prepare the journal entry at the beginning of 2020 to reflect the change. 2. At the end of 2020, prepare comparative income statements for 2020 and 2019. 3. At the end of 2020, prepare comparative retained earnings statements for 2020 and 2019. 4. Prepare a note to the comparative financial statements that discusses the nature and reason for the change from LIFO to FIFO and discloses the effects of the change on the company’s income statement for 2019 and 2020. (Ignore the effects on the balance sheet and statement of cash flows because there is…
- koopman Company began operations on January 1, 2018, and uses the FIFO inventory method for financial reporting and the average cost inventory method for income taxes. At the beginning of 2020, koopman decided to switch to the average cost inventory method for financial reporting. It had previously reported the following financial statement information for 2019: 1. Prepare the journal entry to reflect the change in methods at the beginning of 2020. Show supporting calculations. 2. Prepare the 2020 financial statements. Notes to the financial statements are not necessary. Show supporting calculations.BTS, Inc. has adopted a new accounting system for measuring the value of its inventory from weighted average method (which they used from start of operations in 2017 until 2019) to first-in, first-out method (which they will use starting 2020). In year 2020, how will BTS, Inc. account for the change in its cost formula? A.Treated as change in accounting estimate with a retrospective adjustment for years 2017 to 2019 B.An entry will not be necessary since past is past. C.Treated as change in accounting policy with an adjustment in Retained Earnings during 2020 D.Treated as change in accounting policy which will only affect year 2020 and onwardsThe management of Knight Company has asked its accountingdepartment to describe the effect upon the company’s financial position and its income statements of accounting for inventories onthe LIFO rather than the FIFO basis during 2020 and 2021. The accounting department is to assume that the change to LIFO wouldhave been effective on January 1, 2020, and that the initial LIFO base would have been the inventory value on December 31, 201Presented below are the company’s financial statements and other data for the years 2020 and 2021 when the FIFO method wasemployed.Financial Position as of12/31/19 12/31/20 12/31/21Cash $ 50,000 $ 75,000 $ 90,000Accounts receivable 160,000 200,000 220,000Inventory 280,000 315,000 336,000Other assets 200,000 220,000 245,000Total assets $690,000 $810,000 $891,000Accounts payable $220,000 $235,000 $250,000Other liabilities 80,000 90,000 120,000Common stock 100,000 100,000 100,000Retained earnings 290,000 385,000 421,000Total liabilities and equity $690,000…
- The problem is stated in the picture. Here is the question: 1. How much should be presented as inventory in the statement of financial position as of december 31, 2021?Sheffield Company began operations on January 1, 2018, and uses the average-cost method of pricing inventory. Management is contemplating a change in inventory methods for 2021. The following information is available for the years 2018–2020. Net Income Computed Using Average-Cost Method FIFO Method LIFO Method 2018 $16,010 $19,020 $12,120 2019 18,070 21,180 13,950 2020 20,200 25,010 17,110 (a) Prepare the journal entry necessary to record a change from the average cost method to the FIFO method in 2021. (b) Determine net income to be reported for 2018, 2019, and 2020, after giving effect to the change in accounting principle. (c) Assume Sheffield Company used the LIFO method instead of the average cost method during the years 2018–2020. In 2021, Sheffield changed to the FIFO method. Prepare the journal entry necessary to record the change in principle.Upon reviewing the draft of the financial statements for the year ended, December 31, 2022, Alocasia Company decided that market conditions were such that the provision for inventory obsolescence on December 31, 2022 should be increased by P3,000,000. If the same basis of calculating inventory obsolescence had been applied on December 31, 2021, the provision would have been P1,800,000 higher than the amount recognized in the statement of comprehensive income. What adjustment should be made to the net income of 2021 presented as a comparative figure in the 2022 financial statement?A. 3,000,000 DecreaseB. 1,800,000 DecreaseC. 1,800,000 IncreaseD. No Effect
