Exercise 414 Part Level Submission Headland Company began op

Exercise 4-14 (Part Level Submission)

Headland Company began operations in 2015 and for simplicity reasons, adopted weighted-average pricing for inventory. In 2017, in accordance with other companies in its industry, Headland changed its inventory pricing to FIFO. The pretax income data is reported below.

Year

Weighted-Average

FIFO

Compute the cumulative effect of the change in accounting principle from weighted-average to FIFO inventory pricing.

Year		Weighted-Average		FIFO
2015		$390,600			$414,000
2016		410,000			421,500
2017		414,700			473,400

Solution

Cumulative effect for years prior to 2017 Year Weighted Average FIFO Diffrence Tax Rate (35%) Net Effect 2015             390,600.00        414,000.00            234,00.00 2016             410,000.00        421,500.00 11,500.00 Total 34,900.00       12,215.00         22,685.00