Jacks fireworks is subject to a 30 income tax rate. in its, Ask an Expert

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Jack's Fireworks, which was established in 2007, changed its method of accounting for inventories from the average cost method to the first-in, first-out (FIFO) method in 2009. Cost of goods sold for the periods 2007-2009 under FIFO and the average cost method were:

Year FIFO AVERAGE Cost Difference
2007 $120,000 $110,000 $10,000
2008 140,000 128,000 12,000
2009 150,000 144,000 6,000

Jack's Fireworks is subject to a 30% income tax rate. In its income statement for the year ended December 31, 2009, Jack's would report the cumulative effect of a change in accounting principle, net of income taxes, of:

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M968290

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