Question
Joes BBQ Supply began operations in 2016 and adopted weighted-average pricing for its inventory. At the beginning of 2017, Joes decided to switch to LIFO
Joes BBQ Supply began operations in 2016 and adopted weighted-average pricing for its inventory. At the beginning of 2017, Joes 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
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