Juliana Corporation was incorporated on January 2, 2020 with an initial capitalization of $250,000 (50,000 shares...

  

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Juliana Corporation was incorporated on January 2, 2020 with an initial capitalization of $250,000 (50,000 shares of common stock). The company has been using the LIFO method of inventory valuation since inception. At the beginning of 2022, company management decided to switch to the FIFO method because it is used by all other companies in the industry. The accounting entry to make this accounting change to FIFO was made on January 1, 2022. Julie Sharp, Controller, prepared the preliminary 2022 financial statements using FIFO for the 2022 financial statements. The following financial information includes the published financial information for the years ending December 31, 2021 and 2020 and the preliminary financial information compiled by Julie for the year ended December 31, 2022. Balance Sheet: (FIFO) 2022 (LIFO) 2021 (LIFO) 2020 Assets: 85,000 55,000 335,000 101,818 576,818 70,000 50,000 275,000 130,909 525,909 50,000 35,000 260,000 163,636 508,636 Cash Accounts Receivable Inventory Fixed Assets - Net Total Assets Liabilities and Shareholders' Equity: Accounts Payable Long-Term Debt Total Liabilities 25,000 27,375 52,375 40,000 92,500 132,500 50,000 145,000 195,000 Common Stock - Par Additional Paid-in Capital Retained Earnings Total Shareholders' Equity 5,000 245,000 274,443 524,443 5,000 245,000 143.409 393,409 5,000 245,000 63,636 313,636 Total Liabilities and Shareholders' Equity 576,818 525,909 508,636 Income Statement: Sales 1,210,000 837,000 373,000 1,100,000 770,000 330,000 1,000,000 _700,000 300,000 Cost of Goods Sold Gross Margin 157,500 60,000 32,727 250,227 Salaries Other Operating Expenses Depreciation Total Expenses 165,375 82,500 29,091 276,966 150,000 50,000 36,364 236,364 Net Income 96,034 79,773 63,636 Earnings Per Share 1.92 1.60 1.27 Required: Assume that year-end inventory values are as follows: FIFO LIFO 2022: 2021: 2020: $ 335,000 310,000 285,000 $ 290,000 275,000 260,000 What accounting entry did Julie Sharp make on January 1, 2022 for the change in inventory method? In addition, prepare the appropriate comparative three-year income statements and balance sheets and the appropriate footnote disclosure in accordance with the proposed new accounting standard. (Assume no income taxes.) Finally, prepare a retained earnings statement under 2 assumptions: (a) just two years shown in comparatives (2021 and 2022), (b) three-year comparatives shown (2020, 2021, and 2022). That retained earnings statement is the tricky one, so that's why I'm asking you to do it both ways. Juliana Corporation was incorporated on January 2, 2020 with an initial capitalization of $250,000 (50,000 shares of common stock). The company has been using the LIFO method of inventory valuation since inception. At the beginning of 2022, company management decided to switch to the FIFO method because it is used by all other companies in the industry. The accounting entry to make this accounting change to FIFO was made on January 1, 2022. Julie Sharp, Controller, prepared the preliminary 2022 financial statements using FIFO for the 2022 financial statements. The following financial information includes the published financial information for the years ending December 31, 2021 and 2020 and the preliminary financial information compiled by Julie for the year ended December 31, 2022. Balance Sheet: (FIFO) 2022 (LIFO) 2021 (LIFO) 2020 Assets: 85,000 55,000 335,000 101,818 576,818 70,000 50,000 275,000 130,909 525,909 50,000 35,000 260,000 163,636 508,636 Cash Accounts Receivable Inventory Fixed Assets - Net Total Assets Liabilities and Shareholders' Equity: Accounts Payable Long-Term Debt Total Liabilities 25,000 27,375 52,375 40,000 92,500 132,500 50,000 145,000 195,000 Common Stock - Par Additional Paid-in Capital Retained Earnings Total Shareholders' Equity 5,000 245,000 274,443 524,443 5,000 245,000 143.409 393,409 5,000 245,000 63,636 313,636 Total Liabilities and Shareholders' Equity 576,818 525,909 508,636 Income Statement: Sales 1,210,000 837,000 373,000 1,100,000 770,000 330,000 1,000,000 _700,000 300,000 Cost of Goods Sold Gross Margin 157,500 60,000 32,727 250,227 Salaries Other Operating Expenses Depreciation Total Expenses 165,375 82,500 29,091 276,966 150,000 50,000 36,364 236,364 Net Income 96,034 79,773 63,636 Earnings Per Share 1.92 1.60 1.27 Required: Assume that year-end inventory values are as follows: FIFO LIFO 2022: 2021: 2020: $ 335,000 310,000 285,000 $ 290,000 275,000 260,000 What accounting entry did Julie Sharp make on January 1, 2022 for the change in inventory method? In addition, prepare the appropriate comparative three-year income statements and balance sheets and the appropriate footnote disclosure in accordance with the proposed new accounting standard. (Assume no income taxes.) Finally, prepare a retained earnings statement under 2 assumptions: (a) just two years shown in comparatives (2021 and 2022), (b) three-year comparatives shown (2020, 2021, and 2022). That retained earnings statement is the tricky one, so that's why I'm asking you to do it both ways.

Answer rating: 100% (QA)

Solution Journal entries Due to the fact that the modification will take effect on January 1 2022 a journal entry will be needed to raise the opening inventory by 35000 units and the retained profits ... View the full answer