In 2014, Frost Company, which began operations in 2012, decided to change from LIFO to FIFO because

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In 2014, Frost Company, which began operations in 2012, decided to change from LIFO to FIFO because management believed that FIFO better represented the flow of their inventory. Management prepared the following analysis showing the effect of this change:

In 2014, Frost Company, which began operations in 2012, decided

Frost reported net income of $2,500,000, $2,400,000, and $2,100,000 in 2012, 2013, and 2014, respectively.
The tax rate is 30%.
Required:
1. Prepare the journal entry necessary to record the change.
2. What amount of net income would Frost report in 2012, 2013, and 2014?
3. If Frost's employees received a bonus of 10% of income before deducting the bonus and income taxes in 2012 and 2013, what would be the effect on net income for 2012, 2013, and 2014?

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Related Book For  book-img-for-question

Intermediate Accounting Reporting and Analysis

ISBN: 978-1111822361

1st edition

Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach

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