Question
Blago Wholesale Company began operations on January 1, 2017, and uses the average cost method in costing its inventory. Management is contemplating a change to
Blago Wholesale Company began operations on January 1, 2017, and uses the average cost method in costing its inventory. Management is contemplating a change to the FIFO method in 2018 and is interested in determining how such a change will affect net income. Accordingly, the following information has been developed:
2017 | 2018 | ||||||||||
Final inventory: | |||||||||||
Average cost | $ | 150,000 | $ | 255,000 | |||||||
FIFO | 160,000 | 270,000 | |||||||||
Condensed income statements for Blago Wholesale appear below:
2017 | 2018 | ||||||||||
Sales | $ | 1,000,000 | $ | 1,200,000 | |||||||
Cost of goods sold | 600,000 | 720,000 | |||||||||
Gross profit | 400,000 | 480,000 | |||||||||
Selling, general, and administrative | 250,000 | 275,000 | |||||||||
Net income | $ | 150,000 | $ | 205,000 | |||||||
Required:
Based on this information, what would 2018 net income be after the change to the FIFO method? Ignore any income tax effects of this change in accounting method.
Sales for 2017 and 2018?
Cost of Goods Sold for 2017 and 2018?
Gross Profit for 2017 and 2018?
Selling, general, and administrative for 2017 and 2018?
Net income for 2017 and 2018?
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