Question
On January 1, 2021, Frost Corp. changed its inventory method to FIFO from LIFO for both financial and income tax reporting purposes. The change resulted
On January 1, 2021, Frost Corp. changed its inventory method to FIFO from LIFO for both financial and income tax reporting purposes. The change resulted in a $1,125,000 increase in the January 1, 2021 inventory. Assume that the income tax rate for all years is 20%. The cumulative effect of the accounting change should be reported by Frost in its 2021
| retained earnings statement as a $720,000 addition to the beginning balance. | ||
| income statement as a $720,000 cumulative effect of accounting change. | ||
| retained earnings statement as a $900,000 addition to the beginning balance. | ||
| income statement as a $900,000 cumulative effect of accounting change. |
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Contemporary Auditing
Authors: Michael C. Knapp
11th edition
1305970810, 9781337514811, 1337514810, 978-1305970816
