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In 2020, Frost Company, which began operations in 2018, decided to change from LIFO to FIFO because management believed that FIFO better represented the flow
In 2020, Frost Company, which began operations in 2018, decided to change from LIFO to FIFO because management believed that FIFO better represented the flow of their inventory. Management prepared the following analysis showing the effect of this change:
Ending Inventory | LIFO | FIFO | Cumulative Difference |
12/31/2018 | $241,500 | $272,400 | $30,900 |
12/31/2019 | 243,400 | 301,800 | 58,400 |
12/31/2020 | 257,100 | 327,800 | 70,700 |
Frost reported net income of $2,399,500, $2,369,500, and $2,185,500 in 2018, 2019, and 2020, respectively. The tax rate is 35%.
Required:
1. | Prepare the journal entry necessary to record the change. |
2. | What amount of net income would Frost report in 2018, 2019, and 2020? |
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