Question

Flounder Company began operations on January 1, 2018, and uses the average-cost method of pricing inventory....

Flounder 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

$15,900 $19,170 $12,110

2019

17,880 20,980 13,990

2020

20,180 25,060 17,120


(a) Prepare the journal entry necessary to record a change from the average cost method to the FIFO method in 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

Enter an account title

Enter a debit amount

Enter a credit amount

Enter an account title

Enter a debit amount

Enter a credit amount


(b) Determine net income to be reported for 2018, 2019, and 2020, after giving effect to the change in accounting principle.

Net Income

2018

$Enter a dollar amount

2019

$Enter a dollar amount

2020

$Enter a dollar amount


(c) Assume Flounder Company used the LIFO method instead of the average cost method during the years 2018–2020. In 2021, Flounder changed to the FIFO method. Prepare the journal entry necessary to record the change in principle. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

Enter an account title

Enter a debit amount

Enter a credit amount

Enter an account title

Enter a debit amount

Enter a credit amount

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