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5.55points eBook Print References Check my workCheck My Work button is now enabled Item 17 Rockwell Corporation uses a periodic inventory system and has used
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Item 17
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 (4,800 units @ $34) | $ | 163,200 | ||||
| Purchases: | ||||||
| 4,800 units @ $40 | $ | 192,000 | ||||
| 4,800 units @ $44 | 211,200 | 403,200 | ||||
| Cost of goods available for sale | $ | 566,400 | ||||
| Sales for 2021 (6,000 units @ $65) | $ | 390,000 | ||||
Additional Information:
The company's effective income tax rate is 25% for all years.
If the company had used the average cost method prior to 2021, ending inventory for 2020 would have been $115,200.
8,400 units remained in inventory at the end of 2021.
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?
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Integrated Audit Practice Case
Authors: David S. Kerr, Randal J. Elder, Alvin A. Arens
7th Edition
0912503688, 978-0912503684
