Exercise 414 Pronghorn Company began operations in 2015 and

Exercise 4-14 Pronghorn 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, Pronghorn changed its inventory pricing to FIFO. The pretax income data is reported below. Year Weighted-Average FIFO 2015 2016 2017 $371,800 398,000 411,900 $415,300 421,100 473,200 What is Pronghorn\'s net income in 2017? Assume a 35% tax rate in all years. Net Income & LINK TO TEXT Compute the cumulative effect of the change in accounting principle from weighted-average to FIFO inventory pricing. Net effect $ LINK TO TEXT

Solution

Computation of Net Income Net Income befor tax as per FIFO $473,200.00 = Income Tax @35% $165,620.00 Net Income after Tax $307,580.00 Computation of Commulative effect of change in income Year Income as per WA Income as per FIFO Increase / Decrease in income 2015 $371,800.00 $415,300.00 $43,500.00 2016 $398,000.00 $421,100.00 $23,100.00 2017 $411,900.00 $473,200.00 $61,300.00 Cumm increase in income $127,900.00 Comparitive Income statement Year 2017 2016 2015 Net Income befor tax as per FIFO $473,200.00 421100 473200 Income Tax @35% $165,620.00 $147,385.00 $165,620.00 Net Income $307,580.00 $273,715.00 $307,580.00