1. A company changed from the LIFO cost flow allocation method to the FIFO cost
ID: 2569109 • Letter: 1
Question
1. A company changed from the LIFO cost flow allocation method to the FIFO cost flow allocation method in 2017. The increase in the prior year’s income before taxes is $1,200,000. The tax rate is 40%
Using the T-account template below, prepare the entry to record the change in accounting principle.
ASSETS
=
LIABILITIES
+
EQUITY
Non-current Assets
Current Assets
Property, Plant & Equipment
Investments
Intangible Assets/Other
Current Liabilities
Non-Current Liabilities
Contributed Capital
Earned Capital
Accumulated OCI
ASSETS
=
LIABILITIES
+
EQUITY
Non-current Assets
Current Assets
Property, Plant & Equipment
Investments
Intangible Assets/Other
Current Liabilities
Non-Current Liabilities
Contributed Capital
Earned Capital
Accumulated OCI
Explanation / Answer
Solution.
Here $1,200,000 increase in cash is current asset.
$1,200,000 x 40% = $480,000 current liabilities because it's income tax payable.
Remain $720,000 is capital earned.
ASSETS = LIABILITIES + EQUITY Non-current Assets Current Assets Property, Plant & Equipment Investments Intangible Assets/Other Current Liabilities Non-Current Liabilities Contributed Capital Earned Capital Accumulated OCI 1,200,000 480,000 720,000Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.