HW Question 4

Jackson Corporation began operations on 1-1-2017. Jackson used the last-in-first- out (LIFO) inventory costing method from 1-1-2017 through 12-31-2019. Presented below are income statement and balance sheet numbers for those 3 years, i.e., based on LIFO. 2017, 2018 and 2019 financial statement numbers based on LIFO Income Statement 2017 2018 2019 CGS - LIFO 10,000 11,000 17,500 Net income 30,000 40,000 85,000 Balance Sheet 2017 2018 2019 12-31 Inventory - LIFO 1,000 2,000 4,900 Retained Earnings on 12-31 30,000 55,000 90,000 CGS = cost of goods sold Jackson Corporation changed its inventory costing method to the first-in-first-out method (FIFO) from LIFO as of 1-1-2020. Presented below are the cost of goods sold figures if the FIFO method had been used for 2019 and earlier years. 2017, 2018 and 2019 financial statement numbers based on FIFO Balance Sheet 2017 2018 2019 12-31 Inventory FIFO 1,100 2,400 6,100 CGS = cost of goods sold When Jackson issued its 2020 financial statements in March of 2021, it elected to provide comparative statements from 2019 and 2018. The change will be accounted for using the retrospective approach. As a result of the retrospective type change, the 1-1-2020 journal entry on the books of Jackson would include credit to retained earnings for 1,200 O a credit to retained earnings for 1,100 a debit to retained earnings for 1,200 O a credit to retained earnings for 500 a debit to retained earnings for 800 O a credit to retained earnings for 800 O a credit to retained earnings for 6,100 O a debit to retained aernings for 6,100 O a debit to retained earnings for 1,100 O a debit to retained earnings for 500