Ask Financial Accounting Expert

X industries has used the LIFO inventory since it started business 10 years ago.

It has decided that it would comply with the IFRS standard and would switch to the FIFO method effective January 1, 2014 for the 2014 financial year.

International uses a periodic inventory system.

Records are not available such that years prior to 2013 can be restated. That means that the difference in the January 1, 2013 inventory is an adjustment to January 1, 2013 retained earnings (net of tax)

The tax rate for all periods is 40%

X uses a periodic inventory method

Here are the end products needed;

Restated income statement and retained earnings statement for 2013

Income and retained earnings earning statement for 2014, using FIFO ( the RE for 2013 will include inventory adjustment as of 1/1/13, the RE for 1/1/14 will include the inventory adjustment as of 1/1/14

Entries to adjust inventory, retained earnings and taxes as of January 1, 2014

Journal entries to close purchases and adjust inventories and to create a cost of goods sold for 2014

If it’s suggested you create cost of goods T-accounts for 2013 under both LIFO and FIFO to calculate the number for 2013

For 2014 you really only need a cost of goods sold using the FIFO method since the change will be effective for 2014

These are the inventory values on January 1, 2013

LIFO                                                          FIFO

300 @ 20                               6,000         500 @ 28          14,000

200 @ 23                               4,600

Transaction for 2013;

Purchases

800 @ 32          25,600

700 @ 35          24,500

Sold

1200 @ 60        72,000

Transactions for 2014

Purchases

1,000 @ 38        38,000

1,200 @ 40        48,000

Sold

1,800 @ 79      142,200

Income statement      (2014 has not been issued it is tentative)

2013                                                                    

Sales                                             72,000                         

Cost of goods sold                    40,500                                  

Gross profit                               31,500                                              

S&A expenses                            19,000                                       

Income before tax                    12,500                                 

Tax provision                              -5,000                                           

Net income                                7,500                                              

Retained earnings

                Balance 1/1/13                         130,000 

              Balance 12/31/13                     137,500

                 Net income                                    7,500 

2014

sales                                                  142,200

cost of goods sold                             70,800

gross profit                                         71,400

S&A expenses                                     45,000

income before tax                              26,400

tax provision                                       -10,560

gross profit                                         71,400

net income                                           15,840

Retained earnings

balance 1/1/14                                   137,500

net income                                           15,840

balance 12/31/14                            153,340

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M91580980

Have any Question?


Related Questions in Financial Accounting

Case study - the athletes storerequiredonce you have read

Case Study - The Athletes Store Required: Once you have read through the assignment complete the following tasks in order and produce the following reports Part 1 i. Enter the business information including name, address ...

Scenario assume that a manufacturing company usually pays a

Scenario: Assume that a manufacturing company usually pays a waste company (by the pound to haul away manufacturing waste. Recently, a landfill gas company offered to buy a small portion of the waste for cash, saving the ...

Lease classification considering firm guidance issues

Lease Classification, Considering Firm Guidance (Issues Memo) Facts: Tech Startup Inc. ("Lessee") is entering into a contract with Developer Inc. ("Landlord") to rent Landlord's newly constructed office building located ...

A review of the ledger of oriole company at december 31

A review of the ledger of Oriole Company at December 31, 2017, produces these data pertaining to the preparation of annual adjusting entries. 1. Prepaid Insurance $19,404. The company has separate insurance policies on i ...

Chelsea is expected to pay an annual dividend of 126 a

Chelsea is expected to pay an annual dividend of $1.26 a share next year. The market price of the stock is $24.09 and the growth 2.6 percent. What is the cost of equity?

Sweet treats common stock is currently priced at 3672 a

Sweet treats common stock is currently priced at $36.72 a share. The company just paid $2.18 per share as its annual dividend. The dividends have been increasing by 2,2 percent annually and are expected to continue doing ...

Highway express has paid annual dividends of 132 133 138

Highway Express has paid annual dividends of $1.32, $1.33, $1.38, $1.40, and $1.42 over the past five years, respectively. What is the average divided growth rate?

An investment offers 6800 per year with the first payment

An investment offers $6,800 per year, with the first payment occurring one year from now. The required return is 7 percent. a. What would the value be today if the payments occurred for 20 years?  b. What would the value ...

Oil services corp reports the following eps data in its

Oil Services Corp. reports the following EPS data in its 2017 annual report (in million except per share data). Net income $1,827 Earnings per share: Basic $1.56 Diluted $1.54 Weighted average shares outstanding: Basic 1 ...

At the start of 2013 shasta corporation has 15000

At the start of 2013, Shasta Corporation has 15,000 outstanding shares of preferred stock, each with a $60 par value and a cumulative 7% annual dividend. The company also has 28,000 shares of common stock outstanding wit ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As