Second Thought Products (STP) began operations on January 1, 2015, and adopted the FIFO method of inventory
Question:
Required
a. Compute the cumulative effect, net of tax, for the three-year period needed to record a change from the FIFO method to the average-cost method.
b. Prepare the journal entry to record the change in accounting for inventory valuation.
c. Indicate where STP should report the net of tax cumulative effect, assuming that the first balance sheet presented is for the year ended December 31, 2018.
d. Indicate the cost of goods sold reported on the income statement for 2015, 2016, 2017, and 2018.
e. Assume that this change in principle is considered to be impractical. Indicate the cost of goods on the income statement for 2015, 2016, 2017, and 2018.
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
Intermediate Accounting
ISBN: 978-0132162302
1st edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella