During the third quarter of its 20X7 fiscal year Press Compa

During the third quarter of its 20X7 fiscal year, Press Company is considering the different methods of reporting accounting changes on its interim segments. Preliminary data are available for the third quarter of 20X7, ending on September 30, 20X7, prior to any adustments requires for any accouingchanges The company\'s tax rate is 40 percent of income. Selected interim data for the company, in thousands of dollars, follow Earnings from Net Gross Operations, Sales Profit Before TaxEarnings Net Quarter Ended 20x7: March 31 June 30 Septenber 30 (preliminary) $398 408 432 $127 129 145 $15.0 19.8 21.0 $ 25 35 20X6: March 31 June 30 September 30 404 418 407 389 133 145 142 128 25 35 34 34 15.0 21.0 20.4 20.4 December 31 Required: For the following independent cases, present the company\'s interim financial data for the three quarters of 20X7 and the comparative data for 20x6, assuming that in a meeting on the last day of the third quarter of 20X7, the company decides to make the specified accounting change.

Solution

Schedule of Net Earnings

Quarter Ended

Net Sales

Gross Profit

Operating Expenses

Earnings From Operations Before Tax

Net Earnings

March 31 20X7

$                  398.00

$                 117.00

$      102.00

$                 15.00

$              9.00

June 30 20X7

$                  408.00

$                  117.00

$        96.00

$                 21.00

$            12.60

September 30 20X7

$                  432.00

$                  131.00

$      110.00

$                 21.00

$            12.60

Match 31 20X6

$                  404.00

$                  121.00

$      108.00

$                 13.00

$             7.80

June 30 20X6

$                  418.00

$                  132.00

$      110.00

$                 22.00

$            13.20

September 30 20X6

$                  407.00

$                  117.00

$      108.00

$                   9.00

$              5.40

December 31 20X6

$                  398.00

$                  128.00

$        94.00

$                 34.00

$            20.40

Working Note 1 Calculation of changed Gross Profit

(A) Sales

(B) COGS As per LIFO

(A-B) Gross Profit

Quarter Ended

March 31 20X7

$                  398.00

$                  281.00

$      117.00

June 30 20X7

$                  408.00

$                  291.00

$      117.00

September 30 20X7

$                  432.00

$                  301.00

$      131.00

Match 31 20X6

$                  404.00

$                 283.00

$      121.00

June 30 20X6

$                  418.00

$                  286.00

$      132.00

September 30 20X6

$                  407.00

$                  290.00

$      117.00

December 31 20X6

$                  398.00

$                  270.00

$      128.00

Working note 2

Calculation of Operating Expenses

(A) Gross Profit

(B) Income Before Taxes

(A-B) Operating Expenses

Quarter Ended

March 31 20X7

$                  127.00

$                     25.00

$      102.00

June 30 20X7

$                  129.00

$                     33.00

$        96.00

September 30 20X7

$                  145.00

$                     35.00

$      110.00

Match 31 20X6

$                  133.00

$                     25.00

$      108.00

June 30 20X6

$                  145.00

$                     35.00

$      110.00

September 30 20X6

$                  142.00

$                     34.00

$      108.00

December 31 20X6

$                  128.00

$                     34.00

$        94.00

Working note 3 Calculation of tax

Quarter Ended

Earnings From Operations Before Tax

Tax @ 40%

March 31 20X7

$                    15.00

$                       6.00

June 30 20X7

$                    21.00

$                       8.40

September 30 20X7

$                    21.00

$                       8.40

Match 31 20X6

$                    13.00

$                       5.20

June 30 20X6

$                    22.00

$                       8.80

September 30 20X6

$                       9.00

$                       3.60

December 31 20X6

$                    34.00

$                     13.60

Schedule of Net Earnings
Quarter Ended	Net Sales	Gross Profit	Operating Expenses	Earnings From Operations Before Tax	Net Earnings
March 31 20X7	$                  398.00	$                 117.00	$      102.00	$                 15.00	$              9.00
June 30 20X7	$                  408.00	$                  117.00	$        96.00	$                 21.00	$            12.60
September 30 20X7	$                  432.00	$                  131.00	$      110.00	$                 21.00	$            12.60
Match 31 20X6	$                  404.00	$                  121.00	$      108.00	$                 13.00	$             7.80
June 30 20X6	$                  418.00	$                  132.00	$      110.00	$                 22.00	$            13.20
September 30 20X6	$                  407.00	$                  117.00	$      108.00	$                   9.00	$              5.40
December 31 20X6	$                  398.00	$                  128.00	$        94.00	$                 34.00	$            20.40