In: Accounting
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 (4,300 units @ $35) | $ | 150,500 | ||||
Purchases: | ||||||
4,300 units @ $41 | $ | 176,300 | ||||
4,300 units @ $45 | 193,500 | 369,800 | ||||
Cost of goods available for sale | $ | 520,300 | ||||
Sales for 2021 (5,000 units @ $68) | $ | 340,000 | ||||
Additional Information:
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?
Ignoring income taxes, prepare the 2021 journal entry to adjust the accounts to reflect the average cost method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
No | Transaction | General Journal | Debit | Credit |
---|---|---|---|---|
1 | 1 | Retained earnings | ||
Inventory |
What is the effect of the change in methods on 2021 net income?
|