Joe's BBQ Supply began operations in 2016 and adopted weighted average pricing for its inventory. At the beginning of 2017, Joe's decided to switch to LIFO pricing for inventory. Because inventory prices have been rising in recent years, this resulted in a higher COGS for the year ended 2017 of $13,000 and a higher COGS for the year ended 2016 of $18,000. Income data from 2016 (prepared using weighted-average pricing) and 2017 (prepared using LIFO pricing) are reported below, and the books have not yet been closed for 2017. Assume a tax rate of 30%. Based on this information, what would be the total dollar adjustment to retained earnings at the end of 2017? Sales COGS Depreciation SG&A Pre-Tax Income Tax Expense Net Income 2016 60,000 40,000 5,000 12,000 3,000 900 2,100 2017 75,000 35,000 7,500 15,000 17,500 5,250 12,250 Question 2 0.5 pts Would you debit or credit retained earnings for the adjustment calculated in question 1? O Debit Credit U Question 3 2 pts During 2017, Alphabet Soup decided to revise downward the estimated useful life of its canning equipment from 14 years to 12 years. The equipment was acquired on January 1, 2010 at a cost of $750,000 and was estimated to have a salvage value of $50,000. Alphabet Soup uses straight-line depreciation for this asset. What would be depreciation expense in 2017 using the revised useful life? Assume that the books for 2017 have not yet been closed, that the salvage value is still expected to be $50,000, and that depreciation has not yet been recognized on this equipment for the year 2017 Joe's BBQ Supply began operations in 2016 and adopted weighted average pricing for its inventory. At the beginning of 2017, Joe's decided to switch to LIFO pricing for inventory. Because inventory prices have been rising in recent years, this resulted in a higher COGS for the year ended 2017 of $13,000 and a higher COGS for the year ended 2016 of $18,000. Income data from 2016 (prepared using weighted-average pricing) and 2017 (prepared using LIFO pricing) are reported below, and the books have not yet been closed for 2017. Assume a tax rate of 30%. Based on this information, what would be the total dollar adjustment to retained earnings at the end of 2017? Sales COGS Depreciation SG&A Pre-Tax Income Tax Expense Net Income 2016 60,000 40,000 5,000 12,000 3,000 900 2,100 2017 75,000 35,000 7,500 15,000 17,500 5,250 12,250 Question 2 0.5 pts Would you debit or credit retained earnings for the adjustment calculated in question 1? O Debit Credit U Question 3 2 pts During 2017, Alphabet Soup decided to revise downward the estimated useful life of its canning equipment from 14 years to 12 years. The equipment was acquired on January 1, 2010 at a cost of $750,000 and was estimated to have a salvage value of $50,000. Alphabet Soup uses straight-line depreciation for this asset. What would be depreciation expense in 2017 using the revised useful life? Assume that the books for 2017 have not yet been closed, that the salvage value is still expected to be $50,000, and that depreciation has not yet been recognized on this equipment for the year 2017
