Return to question The CecllBooker Vending Company changed I

Return to question The Cecll-Booker Vending Company changed Its method of valulng Inventory from the average cost method to the FIFO cost method at the beginning of 2018. At December 31, 2017, Inventorles were $126,000 (average cost basls) and were $130,000 a year earller. Cecil-Booker\'s accountants determined that the Inventories would have totaled $167000 at December 31, 2017, and $172000 at December 31, 2016, determined on a FIFO bas s A tax rate of 40% ls ln effect for all years points One hundred thousand common shares were outstanding each year Income trom continuing operations was $460000 In 2017 and $58b,000 in 2018. There were no discontinued operations eltner year Required 1. Prepare the journal entry to record the change in accounting principle 2. Prepare the 2018 2017 comperative income stetements beginning with income from continuing opertions. Include per share Answer is not complctc. Completc this qucstion by entering your answcrs in the tabs below Required Required 2 Prepare the journal entry to record the change in accounting principle. (If no entry is required for a transaction/event, select No journal entry required\" in the first account field.) No Event General Journal Debit Credit Requirad Required 2 >

Solution

Trans. Accounts Title Dr Cr 1 Inventory ($167000-126000) $41,000 Income Tax Payable (40%*41000) $16,400 Retained earnings $24,600 (to record chages in accounting principle) Comparitive Income statement 2018 2017 Income before taxes $585,000 $459,000 Incoem tax expenses $234,000 $183,600 Net Income $351,000 $275,400 No. of common shares outstanding 100000 100000 EPS $3.51 $2.75 Calcuation of Income Before Taxes 2017 Increase in beginning inventory ($172000-$130000) 42000 Increase In Ending Inventory (167000-126000) -41000 Increase in Cost of Good sold 1000 Income before taxes (460000-1000) $459,000