Question
The Cecil-Booker Vending Company changed its method of valuing inventory from the average cost method to the FIFO cost method at the beginning of 2021.
The Cecil-Booker Vending Company changed its method of valuing inventory from the average cost method to the FIFO cost method at the beginning of 2021. At December 31, 2020. Inventories were $ 114,000 ( average cost basic) and were $118,000 a year earlier. Cecil-Booker's accountants determined that the inventories would have totaled $ 143,000 at December 31, 2020, and $ 148,000 at December 31, 2019, if determined on a FIFO basic. A tax rate of 25% is in effect for all years.
One hundred thousand common shares were outstanding each year. Income from continuing operations was $340,000 in 2020 and $465,000 in 2021. there no discontinued operations either year.
Required
1. Prepare the journal entry at January 1, 2021, to record the change in accounting principle ( all tax effects should be reflected in the deferred tax liability account).
2. Prepare the 2021-2020 comparative income statements beginning with income from continuing operations (adjusted for any revisions) include per share amounts.
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