Changes in Accounting Principle Gaubert Inc. decided in March 2017 to change from FIFO to weighted-average...

Changes in Accounting Principle

Gaubert Inc. decided in March 2017 to change from FIFO to weighted-average inventory pricing. The company reported 2017 income as $30,000. Gaubert’s pre-tax income, using the new weighted-average method in 2015 would have been $35,000 ($5k higher than reported).

In 2016, if the new inventory method had been used, Income would have been $27,000 ($3k higher than reported).

What is the proper disclosure of this event?

Changes in Accounting Estimate

Arcadia HS, purchased equipment for $510,000 which was estimated to have a useful life of 10 years with a salvage value of $10,000 at the end of that time. Depreciation has been recorded for 7 years on a straight-line basis. In 2017 (year 8), it is determined that the total estimated life should be 15 years with a salvage value of $5,000 at the end of that time.

Calculate the depreciation expense for 2017

Correction of Errors

In 2018, Hillsboro Co. determined that it incorrectly overstated its accounts receivable and sales revenue by $100,000 in 2017. In 2018, what is the adjusting journal entry in order to correct for this error (ignore income taxes)?

Expert Solution

ekkarill92 answered 1 month ago

Pharoah Incorporated decided to change from the FIFO method to value Inventory to the weighted average...

Pharoah Incorporated decided to change from the FIFO method to value Inventory to the weighted average method In July 2017. The cumulative effect on prior years of retrospective application of the new Inventory costing method was determined to be $21,500 net of $7,000 tax. As prices are decreasing, cost of sales would be lower and ending inventory higher for the preceding period. Retained earnings on January 1. 2017 was $243,500 . (a1) Prepare a partial statement of retained earnings illustrating...

Change in Accounting Principle - Retroactive Approach In 2017, The UC Construction Company changed from the...

Change in Accounting Principle - Retroactive Approach In 2017, The UC Construction Company changed from the completed-contract method to the percentage-of-completion method of accounting for long-term construction contracts. The company continued to use the completed-contract method for tax purposes. The tax rate is 30 percent. The comparative income statements issued previously (using the completed-contract method) showed the following: 2017 2016 2015 2014 Construction revenue $520,000 $480,000 $460,000 $350,000 Construction expenses 410,000 390,000 300,000 200,000 Income before taxes 110,000 90,000 160,000...

n 2017, Frost Company, which began operations in 2015, decided to change from LIFO to FIFO...

n 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...

COST ACCOUNTING COST OF PRODUCTION SUMMARY: WEIGHTED AVERAGE AND FIFO METHODS The Company uses a single...

COST ACCOUNTING COST OF PRODUCTION SUMMARY: WEIGHTED AVERAGE AND FIFO METHODS The Company uses a single department production process. Materials are added at the start of the production process and labor and overhead are added as indicated. For January 2015, the Company records have the following information: UNITS: Beginning WIP: 10,000 units 100% complete for materials, 50% complete for labor; 30% complete for overhead Units started in process 50,000 units Units completed 49,000...

Accounting for a change from FIFO to LIFO will include: Select one: a. An adjustment to...

Accounting for a change from FIFO to LIFO will include: Select one: a. An adjustment to Retained Earnings, but not a Restatement of prior-year presented financial statements. b. A Restatement of prior-year presented financial statements, but not an adjustment to Retained Earnings. c. Both an adjustment to Retained Earnings and a Restatement of prior-year presented financial statements. d. Neither an adjustment to Retained Earnings nor a Restatement of prior-year presented financial statements.

Define what a change in accounting principle is?

Explain each: Change in accounting principle Change in accounting estimate Change in reporting entity Correcting an...

Explain each: Change in accounting principle Change in accounting estimate Change in reporting entity Correcting an accounting error that occurred in a prior period

Why are there differences in presentation for changes in estimates and changes in accounting principle? Discuss...

Why are there differences in presentation for changes in estimates and changes in accounting principle? Discuss the need for disclosures of either one and what information would typically be disclosed?

Calculate the Ending inventory from the following information using FIFO, WEIGHTED AVERAGE methods of Material issues:...

Calculate the Ending inventory from the following information using FIFO, WEIGHTED AVERAGE methods of Material issues: The details relating to the purchase and sales of Material X is given below. Calculate the Ending inventory and Cost of goods sold for the Material X: Date PARTICULARS OMR 1.1.2014 Opening stock of Material X 250 units at 1.200 5.1.2014 Purchased 350 units of Material X at 1.275 7.12014 Purchased 425 units of Material X at 1.340 10.1.2014 Sold 800 units 12.1.2014 Purchased...

Which method is better to evaluate inventory? FIFO, LIFO or weighted average?

Question