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Question: In 2017, Frost Company, which began operations in 2015, decided to change from LIFO to FIFO because management believed that FIFO better represented the flow of their inventory. Management prepared the following analysis showing the effect of this change:

Ending Inventory	LIFO	FIFO	Cumulative Difference
12/31/2015	$240,000	$273,000	$33,000
12/31/2016	245,000	301,000	56,000
12/31/2017	256,000	328,000	72,000

Frost reported net income of $2,500,000, $2,400,000, and $2,100,000 in 2015, 2016, and 2017, respectively. The tax rate is 30%.

Required: 1. Prepare the journal entry necessary to record the change.

2. What amount of net income would Frost report in 2015, 2016, and 2017?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M92716728

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