Problem 20-8 Accounting changes; six situations (LO20-1, 20-3, 20-4] Described below are six independent and unreliated stuations involving accounting changes. Each change occurs during 2018 before any adjusting entries or closin entries were prepared Assume the tax rate for each company is 40% r, at years Any tax effects should be adjusted through the deferred tax lability account 30 a Fleming Home Products introduced a new line of commercial awnings in 2017 that carry a one-year warranty against manufacturer's defects Based on industry experience, warranty costs were expected to approximate 3% of sales Sales of the awn ngs n 2017 were $4.400,000. Accordingly, warranty expense and a warranfy Bablity of $132,000 were recoided in 2017. In late 2018, the company's claims experience was evaluated and it was determined that claims were far fewer than expected 2% of sales rather than 3% Sales of the awnings in 2018 were $4,900,000, and warranty expenditures in 2018 totaled $111,475 b. On December 30, 2014, Rival Industries acquired its office building at a cost of $1,180,000. It was depreciated on a straight line basis assurming a useful ife of 40 years and no salvage value However, plans were finalized in 2018 to relocate the company headquarters at the end of 2022 The vacated office budding wll have a salvage value at that time of $790,000 HOODS Bato Mech andrsing h changed rwentory cost methods touro from FInt the end of 2018 for both nanci l statement and income tax purposes Under FIFO, the inventory at January 1 2018, is $780,000 d. At the beginning of 205, the Hoffman Group purchased office equiment at a cost of $429,000 Its useful life was estimated to be 0 years with no salvage value. The equpment was depreciated by the sum of the -years digts method On January 1, 2018, the company changed to the straight-line method 9 e In Noversber 2016, the State of Minnesota tled sut against Hog Mandfactuiring Company, seeking penalties for violations of clean air laws. When the financial statements were issued in 2017 Hugns had not reached a settlement with state authorities, tbut legal counsel advised Huggins that t was probable the company would have to pay $290,000 in penalties following entry was recorded Accordingly. the Loss-litigation Liability-litigation 96,000 290,000 Late in 2018, a settlement was reached with state authoities to pay a total of $449,000 in t At the beginning or newly acquired of 2018, Jantren Specialties, which uses the sum of the years'-digits method, changed to the straight-ine buildings and equipment. The change increased current year net earnings by $544,000