Question
The Strawser-Morris Corporation uses a periodic inventory system and has used the FIFO cost method since inception of the company in 1985. In 2024, the
The Strawser-Morris Corporation uses a periodic inventory system and has used the FIFO cost method since inception of the company in 1985. In 2024, the company decided to change to the average cost method. Data for 2024 are as follows:
Beginning inventory, FIFO (6,000 units @ $40.00) | $ 240,000 | |
---|---|---|
Purchases: | ||
6,000 units @ $46.00 | $ 276,000 | |
6,000 units @ $50.00 | 300,000 | 576,000 |
Cost of goods available for sale | $ 816,000 | |
Sales for 2024 (10,000 units @ $80.00) | $ 800,000 |
Additional information:
The company's effective income tax rate is 25% for all years.
If the company had used the average cost method prior to 2024, ending inventory for 2023 would have been $216,000.
8,000 units remained in inventory at the end of 2024.
Required:
1. Prepare the journal entry at the beginning of 2024 to record the change in principle.
2. In the 20242022 comparative financial statements, what will be the amounts of cost of goods sold and inventory reported for 2024?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started