CHAPTER 4 HANDOUT - ACCT 3723 - SPRING 2019 INSTRUCTIONS: Read the information on page 1 and complete questions A and B on page 2 and 3. Partial credit will be given, so include any calculations needed for A and B using the blank space on page 4. You must include pages 2, 3, and 4 in your submission to earn full credit on the handout. Barton Corporation is a retail company that purchases ATVs from manufacturers and sells them to customers. Barton had the following income-related information for the fiscal year 2014: 1. Barton had sales of $1,500,000 during the year. 2. At the beginning of 2014, Barton changed its inventory costing assumption from the average cost method to the FIFO method. If Barton had used the FIFO method in prior years, 20Y3 cost of goods sold would have been lower by $30,000. 3. Barton uses the periodic inventory system, and the newly adopted FIFO cost-flow method will be used to calculate cost of goods sold for 2014. After considering the change to FIFO discussed in item #3, Barton had 15 ATVs in inventory at the start of 2014 with a cost of $7,000 each. During the year, Barton purchased 95 ATVs at a cost of $8,000 each. A physical count indicated that there were 10 ATVs in inventory at the end of 2014. 4. Barton had selling, general, and administrative expenses of $340,000 during 2014. 5. At the beginning of 20Y2, Barton purchased equipment for $62,000 that had an estimated useful life of 7 years and an estimated salvage value of $6,000. However, the bookkeeper made an error and used a 10-year useful life in computing depreciation for years 20Y2 and 20Y3. Depreciation for 20Y4 was calculated correctly and is included in SG&A expenses in #4. 6. One of Barton's warehouses was destroyed in a fire during 2014. At the time of the fire, the warehouse had a book value of $200,000 and accumulated depreciation of $90,000. Barton did not receive insurance proceeds related to the warehouse fire. 7. The company disposed of its Southwest geographic division during 2014, and the disposal represented a strategic shift. The division generated a pre-tax loss of $100,000 from operations during the year, and Barton recognized a $310,000 pre-tax gain on the disposal. 8. All income statement items are taxed at 30%.