Question

Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception...

Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception of the company in 1979. In 2021, the company decided to switch to the average cost method. Data for 2021 are as follows:

Beginning inventory, FIFO (6,500 units @ $25) $ 162,500
Purchases:
6,500 units @ $31 $ 201,500
6,500 units @ $35 227,500 429,000
Cost of goods available for sale $ 591,500
Sales for 2021 (9,000 units @ $78) $ 702,000


Additional Information:

  1. The company's effective income tax rate is 25% for all years.
  2. If the company had used the average cost method prior to 2021, ending inventory for 2020 would have been $117,000.
  3. 10,500 units remained in inventory at the end of 2021.

Required:
1. Ignoring income taxes, prepare the 2021 journal entry to adjust the accounts to reflect the average cost method.
2. What is the effect of the change in methods on 2021 net income?

What is the effect of the change in methods on 2021 net income?
The effect of the change for the year 2021 is a $?????? increase in cost of goods
sold resulting in a $?????? decrease in income before taxes and a(n) $???????
decrease in income after tax.
Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since...
The Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception of the company in 1979. In 2018, the company decided to change to the average cost method. Data for 2018 are as follows: Beginning inventory, FIFO (5,700 units @ $37.00) $ 210,900 Purchases: 5,700 units @ $43.00 $ 245,100 5,700 units @ $47.00 267,900 513,000 Cost of goods available for sale $ 723,900 Sales for 2018 (9,400 units @ $77.00) $ 723,800 Additional...
Taylor Corporation has used a periodic inventory system and the LIFO cost method since its inception...
Taylor Corporation has used a periodic inventory system and the LIFO cost method since its inception in 2011. The company began 2018 with the following inventory layers (listed in chronological order of acquisition): 16,500 units @ $10 $ 165,000 21,500 units @ $15 322,500 Beginning inventory $ 487,500 During 2018, 43,000 units were purchased for $20 per unit. Due to unexpected demand for the company's product, 2018 sales totaled 53,000 units at various prices, leaving 28,000 units in ending inventory....
Goddard Company has used the FIFO method of inventory valuation since it began operations in 2015....
Goddard Company has used the FIFO method of inventory valuation since it began operations in 2015. Goddard decided to change to the average cost method for determining inventory costs at the beginning of 2018. The following schedule shows year-end inventory balances under the FIFO and average cost methods: Year FIFO Average Cost 2015 $ 46,600 $ 57,200 2016 82,800 72,600 2017 89,400 82,800 Required: 1. Ignoring income taxes, prepare the 2018 journal entry to adjust the accounts to reflect the...
Vargas Company uses the perpetual inventory system and the FIFO cost flow method. During the current...
Vargas Company uses the perpetual inventory system and the FIFO cost flow method. During the current year, Vargas purchased 1,000 units of inventory that cost $11 each. At a later date during the year, the company purchased an additional 1,400 units of inventory that cost $12 each. Vargas sold 1,100 units of inventory for $15. What is the amount of cost of goods sold that will appear on the current year’s income statement?
1. Vargas Company uses the perpetual inventory system and the FIFO cost flow method. During the...
1. Vargas Company uses the perpetual inventory system and the FIFO cost flow method. During the current year, Vargas purchased 400 units of inventory that cost $15.00 each. At a later date during the year, the company purchased an additional 800 units of inventory that cost $18.00 each. Vargas sold 500 units of inventory for $27.00. What is the amount of cost of goods sold that will appear on the current year's income statement? Select one: a. $6,000 b. $4,500...
The Churchill Corporation uses a periodic inventory system and the LIFO inventory cost method for its...
The Churchill Corporation uses a periodic inventory system and the LIFO inventory cost method for its one product. Beginning inventory of 23,200 units consisted of the following, listed in chronological order of acquisition: 13,600 units at a cost of $9.00 per unit = $122,400 9,600 units at a cost of $10.00 per unit = 96,000 During 2021, inventory quantity declined by 13,200 units. All units purchased during 2021 cost $13.00 per unit. Required: Calculate the before-tax LIFO liquidation profit or...
Coronado Company began operations on January 1, 2018, and uses the average-cost method of pricing inventory....
Coronado 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 $15,980 $19,140 $12,070 2019 18,090 21,090 14,040 2020 20,130 24,990 16,940 (a) Prepare the journal entry necessary to record a change from the average cost method to the FIFO method in 2021. (Credit account...
Beta company uses the periodic inventory system. The beginning balance of inventory and subsequent inventory purchases...
Beta company uses the periodic inventory system. The beginning balance of inventory and subsequent inventory purchases made by the company during the month of July 2019 are given below: July 01: Beginning inventory, 500 units @ $20 per unit. July 18: Inventory purchased, 800 units @ $24 per unit. July 25: Inventory purchased, 700 units @ $26 per unit. The Beta company sold 1,600 units during the month of July. Required: Compute the cost of goods sold and ending inventory...
Inventory Costing Methods-Periodic Method Merritt Company uses the periodic inventory system. The following May data are...
Inventory Costing Methods-Periodic Method Merritt Company uses the periodic inventory system. The following May data are for an item in Merritt's inventory: May 1 Beginning inventory 310 units @ $30 per unit 12 Purchased 260 units @ $35 per unit 16 Sold 340 units @ 24 Purchased 160 units @ $36 per unit Calculate the cost of goods sold for May and ending inventory at May 31 using (a) first-in, first-out, (b) last-in, first-out, and (c) the weighted-average cost methods....
First-in-first-out (FIFO) is a method used by merchandising companies to manage their inventory and cost flow....
First-in-first-out (FIFO) is a method used by merchandising companies to manage their inventory and cost flow. A company using this method will assume that the first inventory in is the inventory that sells first and will track their cost of goods sold according to this assumption. To come up with the cost of goods sold using FIFO, a company will determine the cost of the oldest inventory and multiply it by the units sold. If the cost for the same...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT