Problem 20-8 Accounting changes; six situations (LO20-1, 20-3, 20-4] Described below are six independent and unrelated stuations involving accounting changes. Each change occurs during 2018 before any adjusting entries or closing entries were prepared Assume the tarate for each company is 40% ial years my tax effects should be adjusted through the deferred tax lability account 30 ponts o Flerming 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 awnings n 20 17 were $4.400,000. Accordingly, warranty expense and a warranfy iablity 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 buildig at a cost of $1,180,000. It was depreciated on a straight line basis assuming a useful lfe 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 will have a salvage value at that time of $790,000 C. Hot b,Bato Me ch and ing h changed in entory cos1 r tiods to uro from FIFO t the end of Oig for both nr ancial statement Re% and income tax purposes Under FIF O, the niventory at Jarioary 1,2018, Is $780,000 d At the beginning of 2015, the Hoffiman Group purchased office equipment 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 digas method On January 1, 2018, the company changed to the straight-line method e In Noversber 2016, the State of Minnesota tled sut against Hogg Manufactuiing Company, seeking penalties for violations of 9 clean air laws. When the financial statements were issued in 2017. Hopgins had not reached a settlement with state authorities, but legal counsel advised Huggins that t was probable the company would have to pay $290,000 in penalties Accordingly, the ollowing entry was recorded Loss-litigation Liability-litigation 96,000 299 , 000 Late in 2018, a settlement was reached with state authonities to pay a total of $449,000 in penalties. r At the beginning for newly acquired buildings and equipment The change increased c of 2018, Jantren Specialties, which uses the sum of the years -digits method, changed to the straight-line current year net earnings by $544,000