Toolum Corporation began operations on January 1, 2020, and uses the average cost method of pricing inventory.

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Toolum Corporation began operations on January 1, 2020, and uses the average cost method of pricing inventory. Management is contemplating a change in inventory methods for 2023. The following information is available for the years 2020-2022.

Net Income using

Average Cost Method FIFO Method

2020 20,000 22,000

2021 15,000 20,000

2022 25,000 30,000

Requirements: (Ignore all tax effects.) a. Prepare the journal entry necessary to record a change from the average-cost method to the FIFO method in 2023. Show all workings (7 marks) b. Determine net income to be reported for 2020, 2021 and 2022, after giving effect to the change in accounting policy. (3 marks)

Posted Date: May 18, 2024 10:03 AM

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Toolum Corporation began operations on January 1, 2020, and uses the average cost method of pricing inventory.

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