During 2019 (its first year of operations) and 2020, Fieri Foods used the FIFO inventory costing method for both financial reporting a ax purposes. At the beginning of 2021, Fieri decided to change to the average method for both financial reporting and tax purposes ncome components before income tax for 2019, 2020, and 2021 were as follows: ($ in millions) Revenues Cost of goods sold (FIFO) Cost of goods sold (average) Operating expenses 2019 $ 570 2020 $ 580 2021 $ 610 (59) (94) (57) (65) (90) (100) (318) (326) (330) Dividends of $38 million were paid each year. Fieri's fiscal year ends December 31. Required: 1. Prepare the journal entry at the beginning of 2021 to record the change in accounting principle. (Ignore income taxes.) 2. Prepare the 2021-2020 comparative income statements. 3. & 4. Determine the balance in retained earnings at January 1, 2020 as Fieri reported using FIFO method and determine the adjustment of balance in retained earnings as on January 1, 2020 using average method instead of FIFO method.
During 2019 (its first year of operations) and 2020, Fieri Foods used the FIFO inventory costing method for both financial reporting a ax purposes. At the beginning of 2021, Fieri decided to change to the average method for both financial reporting and tax purposes ncome components before income tax for 2019, 2020, and 2021 were as follows: ($ in millions) Revenues Cost of goods sold (FIFO) Cost of goods sold (average) Operating expenses 2019 $ 570 2020 $ 580 2021 $ 610 (59) (94) (57) (65) (90) (100) (318) (326) (330) Dividends of $38 million were paid each year. Fieri's fiscal year ends December 31. Required: 1. Prepare the journal entry at the beginning of 2021 to record the change in accounting principle. (Ignore income taxes.) 2. Prepare the 2021-2020 comparative income statements. 3. & 4. Determine the balance in retained earnings at January 1, 2020 as Fieri reported using FIFO method and determine the adjustment of balance in retained earnings as on January 1, 2020 using average method instead of FIFO method.
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 4P: Schmidt Company began operations on January 1, 2018, and used the LIFO inventory method for both...
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