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Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception of the company in 1979. In 2018, the company
Rockwell Corporation uses a periodic inventory system and has used the FIFO cost method since inception of the company in 1979. In 2018, the company decided to switch to the average cost method. Data for 2018 are as follows: Beginning inventory, FIFO (5,600 units @ $26) Purchases: 5,600 units @ $32 5,600 units @ $36 Cost of goods available for sale Sales for 2018 (10,000 units @ $75) $145,600 $179,200 201,600 380,800 $526,400 $750,000 Additional Information: a. The company's effective income tax rate is 40% for all years, b. If the company had used the average cost method prior to 2018, ending inventory for 2017 would have been $140,000 c. 6,800 units remained in inventory at the end of 2018. Required: 1. Ignoring income taxes, prepare the 2018 journal entry to adjust the accounts to reflect the average cost method. 2. What is the effect of the change in methods on 2018 net income? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Ignoring income taxes, prepare the 2018 journal entry to adjust the accounts to reflect the average cost method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Required 1 Required 2 Ignoring income taxes, prepare the 2018 journal entry to adjust the accounts to reflect the average cost method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 1 Record adjustment to reflect average cost method. Note: Enter debits before credits Event General Journal Debit Credit 1 No journal entry required Accounts payable Accounts receivable Record entry Accumulated depreciation View general journal a. The company's effective income tax rate is 40% for all years. b. If the company had used the average cost method prior to 2018, ending inventory for 2017 would have been $140,000. c. 6,800 units remained in inventory at the end of 2018. Required: 1. Ignoring income taxes, prepare the 2018 journal entry to adjust the accounts to reflect the average cost method. 2. What is the effect of the change in methods on 2018 net income? Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the effect of the change in methods on 2018 net income? The effect of the change for the year 2018 is a in cost of goods sold resulting in a in income before taxes and a(n) in income after tax.
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