Jones Corporation switched from the LIFO method of costing inventories to the FIFO method at the beginning of 20X1. The LIFO inventory at the end of 20X0 would have been $80,000 higher using FIFO. Rep

We can write your essays! Let our essay writing experts help you get that A in your next essay. Place your order today, and you will enjoy it. No plagiarism.


Order a Similar Paper Order a Different Paper

Jones Corporation switched from the LIFO method of costing inventories to the FIFO method at the beginning of 20X1. The LIFO inventory at the end of 20X0 would have been $80,000 higher using FIFO. Reported retained earnings at the end of 20X0 were $1,750,000. Jones’s tax rate is 21%.

Tax law requires a company using LIFO for tax purposes to use it for financial reporting as well. So, when Jones changes from LIFO to FIFO, it will have to do the same for tax purposes. Further, Jones must recognize taxable income equal to the amount by which it increases the inventory valuation when it makes the change. As a result, Jones will pay tax on an additional $80,000 of taxable income in 20X1.

Required:

A.Calculate the balance in retained earnings at the time of the change (beginning of 20X1) as it would have been reported had FIFO been previously used.

1. Retained earnings balance at January 1, 20X1, using LIFO?

2. Increase cumulative pretax income through December 31, 20×0 using FIFO?

3. Add income tax or Less income tax?  amount of income tax?

4. Increase cumulative net income through December 31, 20X0?

5. Retained earnings balance at January 1, 20X1, using FIFO?

B.Prepare the journal entry to record the change in accounting principle at the beginning of 20X1.

1. Prepare the entry to record the change in inventory method.

Writerbay.net

Everyone needs a little help with academic work from time to time. Hire the best essay writing professionals working for us today!

Get a 15% discount for your first order


Order a Similar Paper Order a Different Paper