A company had been using LIFO for its inventory cost flow assumption since the company was created
Question:
A company had been using LIFO for its inventory cost flow assumption since the company was created in 2017. During 2021, the company decided to switch to FIFO. The company’s inventory balances under each method at the end of each year are as follows:
Year | LIFO | FIFO |
2017 | $140,000 | $138,000 |
2018 | $138,000 | $136,000 |
2019 | $130,000 | $114,000 |
2020 | $146,000 | $147,000 |
2021 | $124,000 | $131,000 |
Using this information:
Ignoring the impact of taxes, prepare the journal entry that the company would book for this change in 2021, assuming that it is properly treated as a change in accounting principle. Enter this in the next question below (along with your calculations).
In the box below, enter the change to retained earnings in the journal entry (positive amount for a debit, negative amount for a credit).
Government and Not for Profit Accounting Concepts and Practices
ISBN: 978-1118983270
7th edition
Authors: Michael Granof, Saleha Khumawala, Thad Calabrese, Daniel Smith